Macro and politics

*TURKSTAT will release January Economic Confidence Index @ 10:00 local time. The Economic Confidence Index increased by 1.8% m/m in December, rising from 97.1 to 98.8. Analyzing the three-month averages, the index level rose from 96.7 to 98 as of December. However, it is noteworthy that the index has remained below the critical threshold value of 100 since March. The Economic Confidence Index, which ranges between 0 and 200, reflects a pessimist outlook regarding the general economic outlook when it falls below the 100 threshold. With the release of these preliminary data for January, we continue to compile the initial signals for economic activity in 2025. Our projections for 2025 suggest that economic activity will exhibit a pronounced cyclical pattern throughout the year. Based on the CBT’s output gap estimates, we expect the lagged impacts of tight monetary policy to continue to be felt until 2Q25. However, in the second half of 2025, we anticipate a modest rebound in activity, driven by easing inflation and the delayed impact of imminent rate cuts. Accordingly, growth, which we expect to decelerate to 2.9% in 2024, is projected in our baseline scenario to show a pronounced divergence between the first and second halves of 2025, ultimately closing the year at a subdued 2.6%, indicating a further decline from the previous year.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of January 17 – 24 today @ 14:30 local time. Based on our calculations from the CBT’s analytical balance sheet, we estimate that during the week of January 17 – 24, the net international reserves increased further by USD2.3bn to USD73.7bn and the gross FX reserves climbed by USD4.3bn to USD167.7bn, reaching new record-high levels. To recall the data from the previous week: During the week of January 10 – 17, the equity market witnessed a foreign outflow of USD67.2mn, while the bond market recorded a notable foreign inflow of USD1.2bn (excluding repo transactions). Furthermore, the foreigners’ share in the total bond stock soared to 8.5% from 7.9%, which stands for the highest level since February 2020. On an annual basis, the equity market saw a cumulative foreign outflow of USD2.9bn, whereas the bond market (excluding repo transactions) experienced a cumulative foreign inflow of USD17.7bn. Besides, the residents’ FX deposits increased by USD802mn (gold accounts excluded, EUR/USD parity adjusted) in the period of January 10 – 17, while the residents’ total FX deposits (including gold, price adjusted) rose by USD516mn in the mentioned period. The CBT’s gross FX reserves rose by USD2.85bn to USD163.42bn, while the net international reserves climbed by USD1.46bn to USD71.41bn. The net reserves excluding swaps, moreover, surged by USD4.5bn to USD59.38bn.