Macro and Politics

*Istanbul Chamber of Industry (ICI) Turkey July Manufacturing PMI will be announced @ 10:00 local time. Istanbul Chamber of Industry (ICI) Turkey Manufacturing PMI declined further from 47.2 to 46.7 in June, marking the lowest reading so far this year and the weakest since October 2024. Remaining below the 50-threshold since March 2024, the index continues to signal a sustained loss of momentum in manufacturing activity for over a year. The accompanying note underlined that manufacturers in Türkiye continued to face challenging demand conditions in June, resulting in sharper slowdowns in new orders, output, employment and purchasing activity. Meanwhile, the rate of input cost inflation ticked higher, but firms raised their output prices at a slower pace given muted customer demand. The note also highlighted that the rate of input cost inflation quickened slightly in June, with input prices rising sharply amid currency weakness and the inflationary impact of the situation in Iran. June PMI data indicate that Turkish manufacturers remain under pressure amid persistently challenging demand conditions. Following a challenging first half of the year, we expect an improvement in economic activity in the second half of 2025, albeit a modest one. While tighter financial conditions since March 19 have heightened downside risks to economic activity, high-frequency indicators do not yet point to a sharp cooling in domestic demand dynamics. As a result, we maintain our growth forecast at 3.1%, while closely monitoring the emerging downside risks.

* According to foreign trade figures released by TURKSTAT, exports rose by 8% y/y in June to USD20.5bn, while imports increased by 15.2% to USD28.7bn. As a result, the foreign trade deficit widened from USD6.6bn to USD8.2bn as of June, whereas the 12-month cumulative deficit increased from USD86.8bn to USD89.1bn. Based on the June foreign trade figures, we estimate that the current account balance will post a relatively a deficit around USD1.5bn in June. We maintain our year-end current account deficit forecast at USD22bn, corresponding to 1.5% of GDP.

* In the week of 18 – 25 July, foreigners registered a net purchase of USD205.2mn in the equity market and USD271mn in government bonds (excluding repo transactions). Thus, the foreigners’ share in total bond stock rose a tad from 6.3% to 6.4% within the mentioned week. Within the mentioned week, the residents’ FX deposits increased by USD1.1bn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) climbed by USD1.2bn during the week of 18 – 25 July. Examining the CBT’s reserves reveals that during the week of 18 – 25 July, the gross FX reserves rose by USD3.3bn to USD172bn and the net international reserves increased by USD1.6bn to USD64.4bn. Moreover, the net reserves excluding swaps climbed by USD2.3bn to USD46.4bn.

*The Treasury released its next three-month (August – October 25’) domestic borrowing strategy as it has a hefty domestic redemption of TL315.1bn in August, while in return plans to borrow TL440.8bn throughout the month via five auctions and three direct sales.