Macro and Politics

*TURKSTAT will release February Economic Confidence Index @ 10:00 local time. The Economic Confidence Index increased by 0.8% m/m in January, rising to the 99.7 level and reaching the highest level since April. Yet, the index level has remained below the critical threshold value of 100 since March. Meanwhile, the index, which approached the 100-threshold in January, will be closely monitored in February to assess whether it will surpass or fail to breach this critical level. 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. The preliminary data for February so far signal a renewed recovery trend in economic activity. Our baseline scenario for this year suggests that after a decline in annual growth in the first quarter of 2025, activity will begin to recover from the second quarter onwards, with GDP growth for the year to be 2.6%. However, preliminary data received so far indicates that the weakening in growth we anticipated in the first quarter may not occur to the extent we had predicted. At the same time, it suggests that the trajectory of growth dynamics continues to pose a risk for the disinflationary process.

*TURKSTAT will release January foreign trade figures 10:00 local time. Preliminary data released by the Ministry of Trade indicates a slight decrease in the foreign trade deficit in January. According to the preliminary figures for January, exports increased by 5.8% year-on-year, reaching USD21.bn, while imports rose by 10.2%, reaching USD28.8bn. Based on these preliminary data, the foreign trade deficit decreased from USD8.8bn to USD7.7bn in January, while the annual deficit climbed from USD82.1bn to USD83.5bn. For 2025, our year-end current account deficit forecast stands at USD15bn (1% of GDP), with upside risks attached.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of February 14 – 21 @ 14:30 local time. Based on our calculations upon the CBT’s analytical balance sheet, we estimate that during the week of February 14 – 21, the net international reserves slumped by USD5.8bn to USD72.3bn and the gross FX reserves slid by USD3.2bn to USD170.1bn. We anticipate that today’s official reserve data will likely reflect a similar trend in line with our calculations. To recall the data from the previous week: During the week of February 7 – 14, 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.