Macro and Politics

* The CBT will release the results of the April Market Participants’ Expectations Survey today @ 10:00 local time. We expect to observe the impact of the recent turbulence experienced in domestic markets as of March 19 on both the inflation and policy rate expectations of market participants in the April survey results. It’s worthnoting that in the most recent survey results for March, participants' year-end CPI expectations were revised from 28.3% to 28%. In the April survey, the participants’ YE inflation forecast is likely to rise towards 30%. Please note that we have recently revised our YE 2025 CPI forecast upwards from 28% to 31%. Following the latest tightening steps taken by the CBT, we assess that the YE policy rate may reach 35%.

* The sequential IP (the seasonally and calendar adjusted monthly figure) contracted by 1.6% m/m in January 2025, while the calendar adjusted IP decreased by 1.9% y/y. The Istanbul Chamber of Industry (ICI) manufacturing PMI, which averaged 47.73 in 4Q24, showed little change in 1Q25, averaging 47.87. Accordingly, we expect IP in the first quarter of this year to mirror the performance seen in 4Q24. Please note that we have recently revised our 2025 year-end GDP growth forecast from 2.6% to 3.1%. 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.

* The equity and the bond market (excluding repo transactions) experienced net foreign outflows of USD445.2mn and USD2bn, while the foreigners’ share in total bond stock slumped from %6.8 to 6%, which stands for the lowest level since June 2024. Moreover, during the period of March 28 – April 4, residents’ FX deposits surged by USD3bn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) climbed notably by USD3.3bn during the week of March 28 – April 4. Besides, the CBT’s gross FX reserve dropped by USD2.2bn to USD154.4bn, while net international reserve eased by USD7.4bn to USD48.7bn. Lastly, net reserves excluding swaps decreased by USD6.6bn to USD31.1bn.