Macro and Politics
Tacirler Investment
* The Treasury will hold 3y CPI-indexed and 5y fixed coupon bond auctions today, finalizing its domestic borrowing program for March. The Treasury tapped the domestic markets for TL21.1bn (including non-competitive sales) through yesterday’s 7y FRN bond auction and total domestic borrowing so far this month has reached TL123.4bn. According to the three-month (Mar–May 2025) domestic borrowing strategy, the Treasury faces total domestic redemptions of TL124.7bn in March, while it plans to borrow TL201.2bn throughout the month. Hence, in line with the Treasury's domestic borrowing projection, a domestic borrowing of approximately TL78bn is anticipated in the auctions scheduled for today.
* The CBT will release January short-term external debt stock figures @ 10:00 local time. Short-term external debt stock in December materialized at USD172.3bn, up by 0.4% m/m. In terms of short-term debt statistics, we believe that “debt stock on a remaining maturity basis,” calculated based on the external debt maturing within one year or less regarding the original maturity, is rather critical, which is at USD221.3bn as of December 2024. Out of this figure, USD16.3bn is debt to the resident banks and private sectors to the banks’ branches and affiliates abroad. Stripping this amount from the total results in USD205bn. We also add 12-month forward-looking CAD expectations on this amount so as to reach Turkey’s annual external financing need (EFN). Accordingly, we calculate EFN as of December 2024 around USD230bn.
* The CBT will release the Residential Property Price Index for February @ 10:00 local time. The Residential Property Price Index (RPPI) registered a monthly rise of 4.7% and an annual increase of 32% in January, reaching a level of 165.9. Yet, in real terms, RPPI dropped by 7.1% y/y. We would like to highlight that while the annual real depreciation in housing prices has persisted since February 2024, the 7.1% annual decrease observed in January marked the most moderate contraction since March, with the pace of annual decline slowing since October. Despite persistently high mortgage rates, the sharp annual increase in mortgage-backed home sales appears to be driven by expectations that housing prices, which have been declining in real terms since February 2024, will rise in the coming period.
* The central government budget recorded a deficit of TL310.1bn in February, while the primary balance posted a deficit of TL170.4bn. Accordingly, the 12-month cumulative budget deficit increased from TL2.1tn to TL2.3tn, and the 12-month cumulative primary deficit rose from TL782.3bn to TL853.7bn. The cumulative budget deficit for the first two months of the year, moreover, stood at TL449.5bn, while the primary deficit amounted to TL146.6bn. It’s worth noting that the Treasury’s cash balance posted a deficit of TL397.6bn in February, with the primary balance showing a deficit of TL265.9bn. As such, the budget deficit in the second month of the year was approximately TL87.5bn lower than the cash deficit, highlighting the continued divergence between the accrual-based and cash-based budget. While cash-based performance is likely to remain weak, in the absence of a forthcoming improvement in the cash budget, we believe that upside risks to growth could intensify. As 2025 is set to be the year of a decisive battle against inflation, the effective implementation of fiscal policy in greater coordination and the achievement of fiscal consolidation will be critical in striking a balance between inflation and growth. In this context, we maintain our 2025 budget deficit forecast at TRY 1.61 trillion (2.7% of GDP). However, we believe that risks to our forecast are increasingly skewed to the upside.