Macro and Politics

* TURKSTAT will release November foreign trade figures @ 10:00 local time. The Ministry of Trade’s preliminary figures point to a modest widening in the foreign trade deficit in November. According to the preliminary figures, exports increased by 2.2% y/y to USD22.7bn, while imports rose by 2.6% y/y to USD30.5bn in November. Accordingly, the monthly trade deficit widened slightly to USD7.8bn in November, up from USD7.6bn in October. On a 12-month rolling basis, the trade deficit edged up from USD91bn to USD91.2bn. Following four consecutive months of surplus, we expect the current account balance to revert to a deficit in the final two months of the year. Based on the prevailing trend and preliminary foreign trade data, we expect the current account deficit to close 2025 at around USD20bn, corresponding to approximately 1.3% of GDP. Our year-end 2026 current account deficit forecast stands at USD25bn, or around 1.5% of GDP.

* The seasonally adjusted unemployment rate rose slightly from 8.5% to 8.6% in December. Meanwhile, the rate of composite measure of labor underutilization – consisting of time-related underemployment, potential labor force and unemployment – declined from 29.7% to 29.1%. Looking into the composition of the underutilization measure, the combined rate of time-related underemployment and unemployment fell from 20% to 18.7%, while the composite measure of unemployment and the potential labor force increased from 19.6% to 20.2%, pointing to a continued weakness in job-search dynamics. Despite the monthly decline in headline unemployment rate, the broad-based labor underutilization rate remains elevated at around 29%. Having exhibited notable stickiness around 30% since early 2025, this indicator suggests that labor market conditions remain weaker than implied by the headline unemployment rate.

* The economic confidence index remained unchanged at 99.5 in December, maintaining its highest level since March 2024. While the index’s continued stay below the 100 threshold indicates that overall economic sentiment remains in pessimistic territory, the gradual rise from 96.3 in July to 99.5 suggests that the deterioration in sentiment has been losing momentum. A breakdown of the December data points to a divergence across sub-components. Consumer confidence declined by 1.8% m/m to 83.5, underscoring the persistence of a cautious stance among households. In contrast, real sector confidence edged up by 0.5% m/m to 103.7. Confidence in the services sector increased by 0.4% to 112.3, while retail trade confidence rose by 1.1% to 115.4. Meanwhile, construction sector confidence fell by 0.5%, declining to 84.5. Overall, the sub-component dynamics suggest that household sentiment remains subdued, whereas activity conditions in the services and retail sectors continue to exhibit relative resilience.