Macro and Politics

* TURKSTAT will release April Industrial Production (IP) figures today @ 10:00 local time. April foreign trade data offer valuable input for our IP forecasts. In April, imports of intermediate goods excluding gold and energy recorded a relatively strong increase—rising by 14.6% m/m and 13.7% y/y. Another leading indicator of industrial activity, the Istanbul Chamber of Industry (ICI) Turkey Manufacturing PMI, remained unchanged from the previous month, standing at 47.3 in April. As a result, leading indicators suggest that seasonally adjusted IP likely remained slightly positive in April. However, in light of the domestic turbulence that emerged in March and the subsequent tightening in financial conditions, we anticipate a deceleration in economic activity, particularly in the real sector, during the second quarter. While our year-end growth forecast stands at 3.1%, we believe downside risks to this projection are mounting.

* The CBT will release weekly international reserves for the period of May 30 – June 6 @ 14:30 local time. Based on our calculations using the CBT’s analytical balance sheet, we estimate that during the week of May 30 – June 6, net international reserves increased by USD2.9bn to USD50.8bn, while gross FX reserves climbed by USD2.7bn to USD156bn. We anticipate that today’s official reserve data will likely reflect a similar picture in line with our calculations. To recall the data from the previous week: During the week of May 23 – 30, the CBT’s gross FX reserves posted no palpable change at USD153.4bn and net international reserves rose by USD1.4bn to, while net reserves excluding swaps increased by USD1.7bn to USD30bn. Please note that the weekly foreign portfolio flows and money & banking statistics, which are usually announced alongside the CBT’s reserves data every Thursday, will be released tomorrow due to religious holiday.