Macro and Politics

*The CBT will release the December Real Sector Confidence Index and Capacity Utilization Rate @ 10:00 local time today. The unadjusted Real Sector Confidence Index (RSCI) remained unchanged at 100.8 in November, while the seasonally adjusted index increased from 102 to 103.2, which stands for the highest level since March. Meanwhile, the Capacity Utilization Rate (CUR) rose from 74.2% to 74.4%, and the seasonally adjusted CUR inched up from 74% to 74.1%. An analysis of the subcomponents of November RSCI reveals that assessments regarding total orders over the past three months, export orders for the next three months, current total orders, expected production volume, and expected employment over the next three months exerted an upward impact on the headline index. In contrast, evaluations related to current inventories of finished goods, overall business conditions, and fixed investment expenditures weighed on the index. Regarding evaluations of the past three months, the improvement became more broad-based: the balance of responses shifted further in favor of firms reporting increases in production and export orders, while the decline reported in domestic orders in previous months reversed in favor of those indicating an increase. November data overall point to modest improvements in both confidence and capacity utilization. Moreover, the recovery in expectations for production, exports, and employment suggests that industrial activity is moving through the final quarter with a mild but sustained positive momentum. We assess that an annual growth rate of around 4.5% is achievable in the third quarter of this year. While our 2025YE growth forecast stands at 3.4%, we view the balance of risks around this projection as skewed to the upside.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of December 5– 19 @ 14:30 local time. Based on our calculations using the CBT’s analytical balance sheet, we estimate that during the week of December 12 – 19, the CBT’s gross FX reserves increased by USD1.4bn to USD192.3bn, while net international reserves rose by USD0.8bn to USD80.3bn. We expect today’s official figures to confirm an increase broadly in line with our estimates. To recall the previous week’s data: Foreign investors posted a modest equity inflow of USD26.3mn during the week of December 5 – 12, while bond markets recorded a strong foreign inflow of USD339.6mn (excluding repo transactions). Moreover, the foreign share in the total government bond stock remained unchanged at 7.3% during the same period. Following USD2bn of bond purchases throughout November and a brief USD23.7mn net outflow in the previous week, today’s data suggest that foreign demand for local bonds has regained momentum. Going forward, the sustainability of foreign inflows will remain closely tied to perceptions surrounding the interest rate path and the strength of standard portfolio channels. During the same period, the residents’ FX deposits climbed by USD202mn (excluding gold, EUR/USD parity effect adjusted), while their total FX deposits (including gold, price adjusted) surged by USD602mn. In terms of official reserves, the CBT’s gross FX reserves increased by USD4.4bn to USD190.9bn, net international reserves rose by USD2bn to USD79.5bn and net reserves excluding swaps climbed by USD4.1bn to USD66bn.