Macro and Politics

*The CBT will release July Balance of Payment figures today @10:00 local time, and we expect the current account balance to register a surplus of USD1.9bn, higher than the market consensus at USD1.5bn of surplus. We forecast that the balance of payments–defined foreign trade deficit will narrow from USD6.5bn to USD4bn, while the services surplus — driven primarily by higher net tourism revenues — will reach USD7.7bn. Consequently, we project the current account to record an approximate surplus of USD1.9bn in July. Our year-end 2025 current account deficit forecast stands at USD 22bn (1.5% of GDP).

* The CBT will release the results of the September Market Participants’ Expectations Survey today @ 10:00 local time. According to the results of the August survey, the year-end 2025 inflation expectation edged slightly higher to 29.69%, after easing from 29.86% to 29.66% in July, ending a two-month decline. 12-month ahead CPI expectations fell from 23.39% to 22.84%, while the 24-month expectations eased from 17.08% to 16.92%. In today’s September survey, participants’ year-end inflation and policy rate expectations will be closely monitored. Please recall that we have recently revised our year-end CPI forecast down from 31% to 29.7%.

* The MPC cut the policy rate by 250bps to 40.5%, reflecting a cautious stance amid recent growth data and risk developments. Recall that market expectations had shifted from a 300bps to a 200bps cut following stronger-than-expected July CPI & 2Q25 GDP growth figures as well as rising domestic political tensions; we also revised our September forecast from 300bps to 200bps. We interpret today’s 250bps policy rate cut by the CBRT as a reflection of a cautious approach to risk balancing. We anticipate additional 250bps cuts in October and December, bringing the year-end policy rate to 35.5%.

* The foreign investors were the net sellers of USD523.2mn in the equity market and USD785.1mn in the bond market (excluding repo transactions). Accordingly, the three-weeks foreign inflow into the bond market came to a halt, with the foreigners’ share in total bond stock slid from 6.7% to 6.4%. During the same period, residents’ FX deposits surged by USD2.5bn (excluding gold accounts and adjusted for the EUR/USD parity effect), while total FX deposits (including gold, price adjusted) soared by USD2.8bn during the week of 29 August – 5 September. Moreover, the CBT’s gross FX reserves increased by USD1.8bn to USD180.3bn, while net international reserves dropped by USD2.4bn to USD71.1bn. Lastly, net reserves excluding swaps eased by USD2.5bn to USD54.2bn.