Macro and Politics

* TURKSTAT will release 4Q25 GDP figures today @ 10:00 local time. We expect the Turkish economy to expand by around 4% y/y in the final quarter of 2025. Yet, we assess that risks to our projection are tilted to the downside. An outcome broadly in line with our baseline would imply full-year growth of 3.8% in 2025. However, in the event of a softer-than-anticipated performance, annual growth could moderate to the 3.6%–3.7% range. We maintain our 2026 growth forecast at 4%.

*Istanbul Chamber of Industry (ICI) Turkey February Manufacturing PMI will be announced @ 10:00 local time. The ICI Turkey Manufacturing PMI declined from 48.9 to 48.1 in January. Remaining below the 50-threshold since April 2024, the index continues to signal a contractionary backdrop in the manufacturing sector. That said, the partial recovery observed in recent months—from the mid-46 range toward levels above 48 - suggests that the pace of deterioration in industrial activity has begun to moderate. In its accompanying note, the ICI emphasized that Turkish manufacturers continued to face challenging operating conditions at the start of the year, highlighting weak demand dynamics alongside declines in both new orders and output. Persistently subdued order flows have led firms to scale back production, employment, and purchasing activity, while both input costs and output prices recorded sharp increases, with inflation rates in both categories reaching their highest levels since April 2024. We expect growth to come in at 3.8% in 2025, accelerating modestly to around 4% in 2026. Despite the strong annual gains observed in industrial production, the expansion appears increasingly concentrated in a limited set of sectors - most notably construction-related segments and defense - rather than broad-based across manufacturing. This suggests that industry-driven growth continues to rely on a narrow sectoral base. Leading indicators and confidence surveys confirm that sectoral divergence within the growth composition remains in place, even as domestic demand and public-supported growth momentum appear to be holding up.