Macro and Politics

* The sequential (the seasonally and calendar adjusted monthly figure) industrial production (IP) increased by 1.2% m/m in December, while the calendar-adjusted annual change pointed to a contraction of 2.1% y/y. Given that IP had risen by 2.5% m/m and 2.2% y/y in November, the December data indicate a marked loss of momentum in industrial activity. As per sub-categories, the annual contraction was driven primarily by high-technology manufacturing, which declined by 25% y/y, alongside sharp contractions in wearing apparel manufacturing (-29.2% y/y), metal ore mining (-23.4% y/y), and other transport equipment manufacturing, which includes defense-related products (-9.2% y/y). Notably, the declines observed in high-technology and other transport equipment mark a return to negative annual growth after several months, underscoring the breadth of the slowdown. Accordingly, IP recorded annual growth of 0.8% in the final quarter of 2025, while calendar-adjusted annual growth stood at 0.6%. On a quarterly basis, IP increased by a modest 0.1% q/q, pointing to a flattish sequential performance. By comparison, in the third quarter, IP had expanded by 5.2% y/y (calendar-adjusted: 5% y/y), while contracting by 0.6% q/q. Overall, the IP figures suggest that industrial activity exhibited only a weak sequential recovery in the final quarter of the year, while losing significant momentum on an annual basis, signaling a broader slowdown in manufacturing activity. Based on leading indicators and the high-frequency data we closely monitor, we expect GDP to grow around 3.6% in the final quarter of 2025. For the full year, we forecast growth of 3.8% in 2025, followed by 4% growth in 2026.

*The Treasury tapped the domestic markets to the tune of TL15.7bn (including non-competitive sales) via yesterday’s 11m G-bond auction, while also sold TL29.9bn at the direct sale of 5y lease certificate. Accordingly, the Treasury’s domestic borrowing total for the month has reached TL229.4bn. According to the Treasury’s domestic borrowing strategy for the February–April 2026 period, the Treasury projects domestic borrowing of TL525.3bn against redemptions totaling TL656.6bn in February. The program also points to a similar stance in March and April, with planned borrowing remaining below redemption amounts. Following yesterday’s bond auction and direct sale, the Treasury will hold 2-year fixed-coupon and CPI-indexed bond auctions on 16 February, and direct sales of a 1.5-year gold-denominated bond and a gold-denominated lease certificate on 17 February and finalize its domestic borrowing program for February.