Macro and Politics

* TURKSTAT will release March house sales figures @ 10:00 local time. In February, home sales reached 112,818 units, reflecting a modest 0.6% monthly increase, while posting a notable 20.1% y/y rise. However, it’s worth noting that the 20.1% annual increase recorded in February marked the weakest y/y growth since August. Moreover, mortgage-backed home sales totaled 16,778 units, recording a 0.3% monthly rise, while the annual surge of 90% underscored continued strong growth. Mortgage sales have exhibited significant annual increases since September. Analyzing housing loan interest rates, the average mortgage rate, which stood at around 42% in 4Q23, showed little change in 4Q24, averaging 41.3%. As of February 2025, the rate remains at approximately 40%. Despite persistently elevated mortgage rates, the sharp annual increase in mortgage-backed sales appears to be largely driven by expectations of a future rise in housing prices, following a period of real-term declines.

* The central government budget posted a TL261.5bn deficit in March, while the primary balance registered a deficit of TL100.2bn. Hence, the cumulative budget deficit reached TL710.8bn in the first quarter of the year, meaning that 36.8% of the full-year deficit target of TL1.93tn has already been utilized. As of March, the 12-month rolling budget deficit stood at TL2.3tn, while the 12-month rolling primary deficit amounted to TL819.5bn. Please note that we have recently revised our 2025 budget deficit forecast upward, from TL1.61tn (2.7% of GDP) to TL1.9tn (3.0% of GDP). The substantial TL710.8bn budget deficit alongside a TL901bn cash deficit for 1Q25 signal that fiscal spending continues to pose a risk to the disinflation outlook. Given that more than a third of the annual deficit projection has materialized within the first three months of the year, we believe that achieving fiscal consolidation in the remainder of the year will be critical to restoring a healthier balance between inflation and growth dynamics.

* The Treasury tapped the domestic markets at an amount of TL47bn (including non-competitive sales) through yesterday’s 4y CPI-linked bond auction, while also sold TL64.2bn at the direct sales of 1y USD-denominated bond & 1y USD-denominated lease certificate. Together with yesterday’s auction and double direct sales, the Treasury has finalized its domestic borrowing program for April and the domestic borrowing since the beginning of the month totaled TL312.8bn, slightly below the initial projection of TL329.5bn. The Treasury will release its next three-month (May – July 25’) domestic borrowing strategy on April 30^th @ 17:30 local time. According to the previous program (April – June 25’), the Treasury has a domestic redemption of TL149.9bn in May, while in return plans to borrow TL174.9bn throughout the month.