Macro and Politics

* The unadjusted Real Sector Confidence Index (RSCI) increased by 2.5 points m/m to 104.1 in February, while the seasonally adjusted index rose by 1.1 points to the same level. Remaining comfortably above the 100 threshold, the index continues to signal an improvement in real sector confidence regarding economic activity. An assessment of the diffusion indices underlying the survey indicates that the rise in February was driven by improvements in total orders over the past three months, expected production over the next three months, current total orders, expected export orders, fixed capital investment expenditures, and current finished goods inventories. In contrast, expectations for total employment over the next three months and assessments of the general business outlook exerted a downward impact on the headline index. Capacity Utilization Rate (CUR) declined to 73.5% in February from 74.1% in the previous month, while the seasonally adjusted CUR eased to 74.0% from 74.4%. In our view, the increase in the RSCI points to a continued recovery in short-term production and order dynamics, even as the moderation in capacity utilization suggests that the current pace of output has yet to gain clear momentum. The softening in employment and general outlook components indicates that the improvement in confidence remains measured rather than broad-based. That said, in an environment where domestic demand remains resilient despite tight financial conditions and growth continues to hover in the 3.5%–4% range, we view the strengthening in order and investment components as meaningful. We assess that the limited decline in capacity utilization reflects cautious production planning rather than a deterioration in demand conditions. We expect GDP growth to reach 4% in 2026, with upside risks attached, following a 3.8% growth in 2025.