Macro and Politics

* TURKSTAT will release the March inflation figures today @10:00 local time. We anticipate a 2.9% m/m CPI rise, which would result in an annual CPI of 38.7%, down from the previous month’s 39.05%. According to a survey conducted by ForInvest, the market consensus also estimates a 2.9% m/m CPI rise, in line with our house forecast. We have recently revised our year-end CPI forecast from 28% to 31%. In the current economic environment, where FX pass-through remains elevated, we expect the recent volatility in TL assets, amidst heightened political tensions since March 19, to be partially reflected in March, but more significantly in the April inflation data.

* The Istanbul Chamber of Industry (ICI) Turkey Manufacturing PMI decreased from 48.3 in March to 47.3, marking its lowest level since October. Consequently, the manufacturing PMI, which averaged 47.73 in 4Q24, showed little change in 1Q25, averaging 47.87. In this context, we expect industrial production (IP) in the first quarter of this year to mirror the performance seen in 4Q24. Given the reduction in working days in February, there may be a slight negative impact on IP, though we do not anticipate any significant change in the main trend in 1Q25 compared to the previous quarter. We have recently revised our 2025 year-end GDP growth forecast from 2.6% to 3.1%. So far, the data points to an annual growth rate of approximately 3% for 1Q25. While data for the first quarter of 2025 is not yet complete in our growth model, high-frequency indicators suggest that economic growth is maintaining the momentum observed in 4Q24. Regarding the increased volatility in the domestic market as of March 19, we expect to see its effects on inflation and growth beginning in the second quarter.