Macro and Politics

* The CBT will release the March Sectoral Inflation Expectations (SIE) Survey @ 10:00 local time. According to the February survey, the 12-month-ahead annual inflation expectation declined marginally for market participants by 0.1pp to 22.1% and fell by a more pronounced 0.9pp to 32% for the real sector. Household expectations remained unchanged at 48.81%. While the overall trend has been downward since early 2024, the marked divergence across segments persists. For the March survey, we see upside risks to inflation expectations for both the real sector and households, reflecting the impact of the US – Iran conflict. Indeed, the March Survey of Market Participants already pointed to an upward revision in expectations: the year-end CPI forecast rose to 25.4% from 24.1% for 2026, and to 18.7% from 18.4% for 2027. Similarly, 12-month-ahead CPI expectations edged up to 22.2% from 22.1%, 24-month-ahead expectations increased to 17.3% from 17.1%, and 5-year-ahead expectations rose to 11.6% from 11.4%.

* The CBT will release the March Household Expectations Survey (HES). The newly introduced HES, first published in February, captures households’ expectations for inflation, the exchange rate, housing prices, and investment behavior. As of February, household 12-month-ahead inflation expectations within the Sectoral Inflation Expectations release are now derived from HES data instead of the Consumer Tendency Survey. In February, the 12-month-ahead inflation expectation remained unchanged at 48.81%. However, the distribution pointed to a deterioration in sentiment: the share of households expecting inflation to decline fell by 4.63 points to 20.33%, while the share expecting an increase rose by 4 points to 63.35%. While the overall trend had been broadly downward since early 2024, the pronounced divergence across segments persisted, pointing to a backward-looking and adaptive expectations formation process. Accordingly, we expect household 12-month-ahead inflation expectations to move higher in March, as the US–Iran conflict weighs on expectations.

* The unadjusted real sector confidence index (RSCI) declined by 3.1 points to 101 in March, marking the sharpest monthly drop since November 2023. The seasonally adjusted index fell more markedly by 4.1 points to 100. Diffusion indices indicate that all sub-components of the index—covering expected output over the next three months, general business conditions, orders, investment, export orders, inventories and employment—contributed negatively. Assessments for the past three months point to a more pronounced deterioration in production and order indicators, with the weakness in domestic demand becoming increasingly evident. Forward-looking indicators also signal a broad-based loss of momentum, with expectations for output, orders, employment and investment weakening compared to the previous month. Capacity Utilization Rate (CUR) corroborates this picture, easing to 73.3% in March from 73.5%, while the seasonally adjusted rate remained flat at 74%. In line with our expectations, we assess that the US – Iran conflict has weighed on real sector confidence regarding economic activity. Rising geopolitical risks, coupled with the broadening loss of confidence across the real sector, point to increasing downside risks to our 2026 GDP growth forecast of 4%.