Macro and Politics

* The sequential (the seasonally and calendar adjusted monthly figure) industrial production (IP)  rose by 0.4% in August, while calendar-adjusted IP increased by 7.1% y/y. Please recall that IP had contracted by 1.8% m/m, while expanded by 5% y/y back in July. The data continue to point to a widening divergence across sectors, with construction and defense-related industries standing out positively, while high-tech production remains volatile. Similar to previous months, the rise in annual industrial output in August was not broad-based but rather concentrated in a few segments and amplified by base effects. Consequently, and in line with leading indicators, we expect the underlying trend in real sector activity to remain subdued. Nevertheless, the ongoing sectoral divergence within industry and the strong performance led by defense spending could keep overall industrial production above expectations in the third quarter. Our year-end growth forecast for 2025 stands at 3.4%, while we project 3.7% for 2026.

* Foreign investors were net sellers through standard portfolio channels in the week of September 26 – October 3, recording net outflows of USD84.1mn from equities and USD358.5mn from bonds (excluding repo transactions). The foreign share in total government bond stock remained unchanged at 6.8%. Moreover, during the week of September 26 – October 3, the residents’ FX deposits dropped by USD658mn (excluding gold accounts and adjusted for the EUR/USD parity effect), while their total FX deposits (including gold, price adjusted) increased by USD196mn during the week of September 26 – October 3. In terms of official reserves, the CBT’s gross FX reserves increased by USD3.3bn to USD186.4bn and net international reserves rose by USD2.5bn to USD75.2bn, while net reserves excluding swaps climbed by USD2.3bn to USD59.4bn.