Macro and Politics

*TURKSTAT will release 4Q24 GDP figures today @ 10:00 local time. We expect the Turkish economy to return to positive sequential growth in the final quarter of 2024, after two consecutive quarters of contraction, while we anticipate annual growth to reach 2.8%. Accordingly, we estimate full-year growth for 2024 to come in at 3.1%. According to a survey conducted by ForInvest (previously known as Foreks), the median forecast also stands at 2.8%. While the median forecast aligns precisely with our in-house estimate, it is important to highlight the considerable spread in survey projections, which range widely from 2.2% to 4.7%.

* January Employment figures will be released @ 10:00 local time. The adjusted unemployment rate edged down to 8.5% from 8.6% in December, yet the broad-based unemployment calculations remained higher as the rate of composite measure of labor underutilization – including time related underemployment, potential labor force and unemployment— posted no change at 28.2%, which stands for the highest level since January 2021. The combined rate of time-related underemployment and unemployment slid barely to 18.4% from 18.5%, while the combined rate of unemployment and potential labor force rose slightly to 19.5% from 19.4%.  We expect growth dynamics to gain some momentum starting in the second half of 2025 after a stagnant period, although we forecast GDP growth for 2025 to be lower than in 2024, at 2.6%. As a result, we anticipate that the unemployment rate could rise towards 10% in 2025 and more importantly, we assess that the high levels of composite measure of labor underutilization to sustain its rising tendency.

*The Economic Confidence Index dropped merely by 0.5% m/m in February, easing to 99.2 level and continuing to remain below the 100-threshold. It’s worth noting that the index level 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. The preliminary data for February so far signal a renewed recovery trend in economic activity. Examining the monthly changes in the subcomponents of the February data: Consumer confidence index increased by 1.4% to 82.1, real sector confidence index rose by 0.2% to 102.8, services confidence index dropped by 1.9% to 114.2, retail trade confidence index climbed by 1.6% to 116.3 and construction confidence index slid by 2.7% to 89.3 in February compared to the previous month.

* TURKSTAT released January foreign trade figures and imports rose by 9.6% y/y to USD28.7bn and exports increased by 5.8% y/y to USD21.1bn. As a result, the trade deficit narrowed from USD8.8nm to USD7.bn, while the annual deficit widened from USD82.1bn to USD83.4bn. We expect the current account balance to post a deficit around USD4.5bn in January. Assuming that the real appreciation of the TL will persist in 2025, albeit to a lesser extent than in 2024, and that weak demand conditions in key export markets will continue, we are revising our year-end 2025 current account deficit forecast from USD15bn (1% of GDP) to USD22bn (1.5% of GDP).

* The equity and the bond market (excluding repo transactions) experienced a net foreign inflow of USD74mn and USD180mn, respectively, in the week of February 14 – 21. On an annual basis, the equity market recorded a cumulative foreign outflow of USD2.5bn, whereas the bond market (excluding repo transactions) saw a cumulative foreign inflow of USD17.9bn. In ytd terms, there has been a foreign inflow of USD330mn and USD2.1bn to the equity and the bond market (excluding repo transactions), respectively. During the week of February 14 – 21, the resident’s FX deposits experienced the sharpest increase since August 2023 as the FX deposits surged by USD3.3bn (gold accounts excluded, EUR/USD parity adjusted), while total FX deposits (including gold, price adjusted) saw a palpable increase of USD3.7bn. The CBT’s gross FX reserves dropped by USD3.2bn to USD170bn, while net international reserves slid by USD6.2bn to USD72bn. The CBT’s net reserves excluding swaps, moreover, decreased by USD5.7bn to USD65.7bn.