Macro and Politics

* The CBT has introduced additional macroprudential measures aimed at tightening control over credit growth, according to a Bloomberg HT report based on letters sent by the CBT to banks on March 27. Accordingly, reserve requirement (RR) exemptions previously granted to earthquake-related lending and certain commercial loans have been removed. Under the new framework, loans extended to regions affected by the February 2023 earthquakes will no longer be eligible for RR exemptions, implying that banks will be required to hold reserves against these exposures. In addition, broad-based exemptions on commercial loans have been narrowed and limited exclusively to small and medium-sized enterprises (SMEs). The scope of tradesmen loans has also been tightened, with these loans now reclassified from the non-SME segment into the SME segment and subject to stricter growth limits. According to the domestic news flow, these measures apply to loans extended as of March 28 and point to a direct increase in funding costs for banks, likely weighing on credit supply. The same report also notes that, in a separate communication dated March 27, exemptions have been expanded for qualified loans backed by credit guarantee institutions such as the Treasury, including those extended under the Participation Finance Guarantee Support Program. Taken together, these measures suggest a significant narrowing of exemption channels that had previously supported credit expansion, effectively limiting banks’ ability to circumvent reserve requirement constraints. We therefore assess that credit growth is shifting toward a more controlled trajectory through the cost channel. It’s worth noting that the report is based on Bloomberg HT sources and draws on letters sent by the CBT to banks on March 27 as no official statement has been released by the CBT on the matter.

* February Employment figures will be released @ 10:00 local time. The seasonally adjusted unemployment rate increased from 7.8% to 8.1% in January, while the broader underutilization measure that we closely monitor – the rate of composite measure of labor underutilization consisting of time-related underemployment, potential labor force and unemployment – climbed from 29% to 29.9%. Looking into the composition of the underutilization measure, the combined rate of time-related underemployment and unemployment edged up from 18.5% to 19.2%, while the composite measure of unemployment and potential labor force increased from 19.7% to 20.2%.Levels hovering around 30% in the broad unemployment measure point to a labor market that is materially weaker than implied by the headline unemployment rate. Against this backdrop, we expect the anticipated drag on economic activity stemming from rising US–Iran tensions to reinforce the upward trend in broader labor underutilization indicators in the period ahead.

* TURKSTAT will release February foreign trade figures @ 10:00 local time. Preliminary data released by the Ministry of Trade point to a widening in the external trade deficit in February. According to the flash figures, exports increased by 1.6% y/y to USD21bn, while imports rose by 6.1% y/y to USD30.3bn. Accordingly, the trade deficit widened to USD9.2bn in February from USD8.4bn in January, with the rolling annual deficit increasing from USD92.9bn to USD94.3bn. We expect the current account balance to post a deficit of around USD7.5bn in February. Following the surge in energy prices in the aftermath of escalating US–Iran tensions, we have revised our year-end current account deficit forecast to USD36bn (2.1% of GDP), up from USD30bn (1.7% of GDP). That said, we continue to see upside risks to our forecast.

* Based on our calculations derived from the CBT’s analytical balance sheet, we estimate that the net FX reserves slumped by USD22.1bn to USD35.2bn in the week of March 20–27, while gross FX reserves tumbled by USD22bn to USD155.6bn. We expect the official reserve data to be released on Thursday to point to a decline broadly in line with our estimates.

* The economic confidence index declined to 97.9 in March from 100.7, marking its lowest level since September. As a reminder, the index had risen from 99.4 to 100.7 in February, moving above the 100 threshold for the first time since March 2025. Note that The economic confidence index can take value between 0 and 200 and it indicates an optimistic outlook about the general economic situation when economic confidence index is above 100, while confirming a pessimistic outlook when it is below 100.  A breakdown of the March data shows that the consumer confidence index declined by 0.8% to 85, the real sector confidence index fell by 3.9% to 100, the services confidence index edged down by 0.5% to 113.2, the retail trade confidence index decreased by 2.0% to 113.6, and the construction confidence index dropped by 3.9% to 80.6.