Macro and Politics

* The CBT will release the April Sectoral Inflation Expectations survey @ 10:00 local time. According to the results of the March Sectoral Inflation Expectations survey, 12-month ahead inflation expectations continued to decline among market participants and the real economy, while household expectations increased for the second consecutive month, albeit modestly. Hence, as per the March survey results, 12-month-ahead annual inflation expectations, compared to the previous month, decreased by 0.7 points to 24.6% for market participants, by 0.8 points to 41.1% for real sector, while increased by 0.1 points to 59.3% for households. As the March survey does not reflect the turbulence in domestic markets experienced since last week, we expect to observe the impact of volatility on the inflation expectations of economic units in today’s April survey results. We anticipate that inflation expectations among market participants, the real sector, and households are likely to rise in April.

* The CBT will release the weekly portfolio flows and money & banking statistics for the period of April 11 – 18@ 14:30. Due to this week’s public holiday, weekly portfolio flows and money & banking statistics data, typically released alongside the reserves data in every Thursday, will be published today. To recall the previous period’s data: During the period of April 4 – 11, the equity and the bond market (excluding repo transactions) experienced net foreign outflows of USD293.2mn and USD2.8bn, and the foreigners’ share in total bond stock tumbled from %6 to 5.2%, which stands for the lowest level since May 2024. Moreover, residents’ FX deposits slid by USD3bn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) slumped notably by USD2.4bn during the week of April 4 – 11.

*Credit rating agency S&P is expected to release Turkey’s sovereign rating review today. Any possible review announcement would likely come late at night Turkish time. It’s important to note that these calendars are only reference points and do not guarantee that the agencies will conduct a review or make a new rating decision. S&P last revised Türkiye’s sovereign credit rating on November 1, 2024, upgrading it by one notch from 'B+' to 'BB-', while affirming a “stable” outlook. Given the prevailing idiosyncratic dynamics and the absence of material shifts in policy credibility or external vulnerabilities since the last review, we do not expect any changes to either the rating or the outlook in today’s scheduled assessment.

* The unadjusted Real Sector Confidence Index (RSCI) declined from 104.1 to 103.2 in April, while the seasonally adjusted RSCI fell from 103.2 to 100.8 — its lowest level since September. Meanwhile, the capacity utilization rate (CUR) edged down from 74.4% to 74.3% in April, with the seasonally adjusted CUR decreasing more notably from 75.2% to 74.6%. We have started to observe the adverse impact of heightened political tensions and market volatility — particularly since March 19 — on leading indicators as of April. While our GDP growth forecast for 2025 remains at 3.1%, we assess that downside risks to this projection are mounting. The combination of tighter financial conditions and recent domestic developments raises the probability of sub-3% growth in 2025.

* During the week of April 11 – 18, the CBT’s the gross FX reserves decreased by USD0.9bn to USD146.7bn and the net international reserves dropped by USD0.2bn to USD38.6bn. Total swap stock rose by a mere USD0.1bn to USD18.2bn, while net reserves excluding swaps slid by USD0.4bn to USD20.4bn.