Macro and politics

* TURKSTAT will release January inflation figures today @10:00 local time. We expect the CPI to increase by 4.1% m/m in January, bringing the annual CPI down from 44.4% to 40.9%. According to the survey conducted by Foreks, the market consensus points to a slightly higher monthly inflation estimate of 4.3%. For 2025, we expect the downward tendency in inflation to persist; however, we project the pace of decline to slow slightly in the second half of the year compared to the first half. We maintain our year-end CPI forecast at 28%.

* Istanbul Chamber of Industry (ICI) January PMI figures will be announced @ 10:00 local time. 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. Recall that ICI PMI increased to 49.1 level from 48.3 back in December, while standing below the 50-threshold for the ninth consecutive month. The accompanying note underlined that the Turkish manufacturing sector neared stabilization in December as rates of moderation in output, new orders, purchasing and inventories all softened over the course of the month.