Macro and Politics

* The Treasury and Finance Ministry will release December central government budget figures @ 11:00 local time. The Treasury’s cash balance posted a deficit of TL333.1bn in December, while the primary balance recorded a deficit of TL216.9bn. As a result, the cumulative Treasury cash deficit for full-year 2025 reached TL2.1tn. Treasury cash balance figures serve as a leading indicator for the central government budget data, scheduled for release on Thursday, January 15. Against this backdrop, we estimate that the central government budget may have posted a deficit of around TL900bn in the final month of the year, while the full-year 2025 budget deficit is likely to come in broadly in line with our house forecast of TL2.2tn (3.5% of GDP). Looking ahead, we forecast the 2026 budget deficit at TL2.8tn (3.4% of GDP). This outlook points to an improvement driven primarily by changes in expenditure composition rather than a structural tightening in the fiscal stance. We expect the continued decline in earthquake-related spending in 2026 to remain supportive of the budget balance. That said, trends in current expenditures and capital spending will continue to be the key areas to monitor closely from a fiscal discipline perspective.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of January 2 – 9 @ 14:30 local time. Based on our calculations using the CBT’s analytical balance sheet, we estimate that during the week of January 2 – 9, the CBT’s gross FX reserves surged by USD7.3bn to USD196.5bn, while net international reserves climbed by YSD6.3bn to USD83bn. We expect today’s official figures to confirm a change broadly in line with our estimates. To recall the previous week’s data: Foreign investors posted net purchases of USD102.3mn in the equity and USD288.5mn in the bond market (excluding repo transactions) during the December 26 – January 2 period. As a result, foreign inflows into the equity market extended to a fifth consecutive week, while the foreign share in the total bond stock rose from 7.3% to 7.5%, reaching its highest level since March. Since early November, we have observed a palpable re-engagement of foreign investors through standard portfolio channels. Over the past two months, cumulative foreign inflows amounted to USD2.2bn in the bond market and USD861mn in equities, underscoring a broad-based improvement in foreign risk appetite toward domestic assets. Looking at money and banking statistics, during the week of December 26 – January 2, the residents’ FX deposits (excluding gold, EUR/USD parity effect adjusted) declined by USD969mn. Of this decline, USD245mn stemmed from households, while USD724mn was driven by corporate FX deposit outflows. Including a USD1.08bn increase in gold accounts, residents’ total FX deposits (including gold, price adjusted), rose by USD112mn over the week. Finally, regarding reserve dynamics, the CBT’s net FX reserves declined by USD2.9bn to USD76.8bn in the December 26 – January 2period, while gross FX reserves fell by USD4.8bn to USD189.2bn. Over the same period, the swap stock increased by USD2.0bn to USD14.3bn, whereas the net reserves excluding swaps dropped by USD4.9bn to USD62.5bn.