Macro and Politics

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of September 19 – 26 @ 14:30 local time. Based on our calculations using the CBT’s analytical balance sheet, we estimate that during the week of September 19 – 26, net international reserves rose by USD2.4bn to USD72.7bn, while gross FX reserves increased by USD4.2bn to USD183.2bn. We anticipate that today’s official reserve data will likely reflect a similar rise in line with our estimates. To recall the previous week’s data: Foreign investors were net buyers through standard portfolio channels in the week of September 12–19, recording net inflows of USD407.6mn into the equity market and USD178mn into the bond market (excluding repo transactions). The foreign share in the total government bond stock remained unchanged at 6.6%. Moreover, the residents’ FX deposits climbed by USD534mn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) rose by USD1.2bn during the week of September 12 – 19. In terms of official reserves, the CBT’s gross FX reserves increased by USD1bn to USD179bn and net international reserves rose by USD0.8bn to USD70.3bn, while net reserves excluding swaps climbed by USD1.3bn to USD53bn.

* The Istanbul Chamber of Industry (ICI) Turkey Manufacturing PMI fell from 47.3 in August to 46.7 in September. Accordingly, after averaging 47.06 in the second quarter, the PMI eased to 46.63 in the third quarter. Remaining below the 50-threshold since April 2024, the index highlights that the sector has been losing momentum for more than a year. The accompanying note underlined that firms again recorded slowdowns in new orders and output and were reluctant to commit to hiring or the fresh purchasing of inputs. Meanwhile, inflationary pressures strengthened but remained muted relative to the respective series averages. The note also highlighted that given muted workloads, firms were reluctant to take on additional staff in September, and noted a preference for using existing stocks of inputs to support production over the purchasing of additional materials. As a result, employment, input buying and pre-production inventories all moderated solidly at the end of the third quarter. Leading indicators point to a slowdown in activity in the third quarter compared to the previous one. The sharp expansion in industrial output observed in the second quarter (6.1% YoY) was largely driven by a favorable base effect. As this effect fades in the third quarter, we expect the underlying weakness in industrial activity to become more evident. Taking into account the stronger-than-expected first-quarter GDP outturn and the comprehensive revisions to the national accounts by TURKSTAT, we have revised our 2025 year-end growth forecast upward from 3.1% to 3.4%.