Macro and Politics

* The foreign investors were the net buyers on both the equity and bond markets in the week of February 7 – 14. Accordingly, the equity and the bond market (excluding repo transactions) experienced a net foreign inflow of USD108.4mn and USD1.85bn, respectively. The robust foreign inflow observed in the bond market indicated the strongest entry since May 2024, when foreign purchases amounted to USD2.8bn. Besides, the foreigners’ share in total bond stock materialized at 8.3%. While we expect a gradual continuation of rate cuts in the coming period, we anticipate that foreign investors' interest in the bond market will persist. Besides, the residents’ FX deposits dropped by USD324mn (gold accounts excluded, EUR/USD parity adjusted) in the period of February 7 – 14, while their total FX deposits (including gold, price adjusted) increased slightly by USD139mn in the week of February 7 – 14. Moreover, the CBT’s gross FX reserves climbed by USD5.7bn to USD173.3bn, while net international reserves rose by USD5.8bn to USD78.1bn. Net reserves excluding swaps increased by USD6.3bn to USD71.3bn, while net swap stock edged down by USD0.4bn to USD6.8bn.

* The Consumer Confidence Index ameliorated to a level of 82, up from 81 as of February, indicating the highest level since June 2023. Additionally, the 3-month moving average increased from 80.7 to 81.5, reaching its peak since July 2023. As per the sub-categories of the February data, the index related to the financial situation of households at present increased to 65.6 from 64.8, while the general economic situation expectation index over the next 12-month period edged up to 79.3 from 79.1. Moreover, the financial situation expectations of households over the next 12 months index climbed to 83.1 level from 80.5. Lastly, the sub-index related to the assessment on spending money on durable goods over the next 12 months compared to the past 12 months period, which is an important leading indicator in terms of domestic demand, increased to 100.3 from 99.4. Following weak signals regarding economic activity in the January indicators, the initial data for February suggests a re-emerging recovery. As we await the release of the real sector confidence index and the economic confidence index next week, we will continue to compile signals for the first quarter. After anticipating positive quarterly growth and an annual growth rate close to 3% in the final quarter of 2024, we expect economic activity to weaken once again in the first quarter of 2025. For 2025, we foresee a continued decline in annual growth through the second quarter, followed by a rebound in the second half of the year. Overall, we forecast GDP growth for the year to be 2.6%, below the growth rate for 2024.