Macro and Politics

* The current account balance posted a USD4.0bn deficit in November, while the 12-month rolling current account deficit widened from USD22.0bn to USD23.2bn. Over the Jan-Nov period, the cumulative current account deficit stood at USD18.5bn. The current account balance excluding gold and energy (core balance) recorded a USD2.1bn surplus in November; however, the annualized surplus in the core balance narrowed from USD46.0bn to USD44.6bn. Preliminary December foreign trade data released by the Ministry of Trade point to a further widening in the trade deficit. According to the advance figures, exports rose by 12.8% y/y to USD26.4bn, while imports increased by 11.2% y/y to USD35.8bn. As a result, the trade deficit widened to USD9.4bn in December from USD8.0bn in November, while the 12-month rolling trade deficit edged up from USD91.3bn to USD92.0bn. We expect the current account deficit to reach USD5.3bn in December. For the same month, we project the balance-of-payments-defined trade deficit to widen to USD6.7bn, while the services balance surplus is likely to decline to USD3.1bn, reflecting a moderation in net travel income. Against this backdrop, we now expect the 2025 current account deficit to close at around USD24bn (1.5% of GDP), exceeding our previous house forecast of USD20bn (1.3% of GDP), barring potential revisions. We also revise up our end-2026 current account deficit forecast to USD30bn (1.7% of GDP) from USD25bn (1.5% of GDP).

* The Treasury tapped the domestic markets to the tune of TL89.8bn via yesterday’s 4y TLREF-indexed and 10y fixed-coupon bond auctions, including non-competitive sales (TL53.6bn). Demand at the 4y TLREF-indexed auction was robust with a bid-to-cover ratio of 2.69x, while the term rate was set at 18.77%. By contrast, the bid-to-cover ratio was relatively weak at 2.01x for the 10y fixed-coupon auction and the average compounded yield settled at 29.09%. With yesterday’s double auctions, the Treasury’s total domestic borrowing for the month reached TL336bn. The Treasury’s January domestic borrowing program will be completed on January 26, with direct sales of a 1y gold-denominated bond and a 1y gold-denominated lease certificate. According to the Treasury’s Jan – Mar 2026 domestic borrowing strategy, total redemptions of TL613.3bn scheduled for January are set to be met through three direct sales and seven auctions, with planned domestic borrowing amounting to TL487.7bn, implying a targeted rollover ratio of 80%. Having already raised TL336bn from domestic markets so far this month, the Treasury is likely to borrow around TL152bn via the direct sales scheduled for next week.