Macro and Politics

* TURKSTAT will release March foreign trade figures @ 10:00 local time. Preliminary data released by the Ministry of Trade point to a further widening in the trade deficit. According to the preliminary figures, exports declined by 6.4% y/y to USD21.9bn, while imports increased by 8.4% y/y to USD33.2bn. Accordingly, the trade deficit widened to USD11.3bn in March from USD9bn in February, while the rolling annual deficit rose to USD98.2bn from USD94.1bn. We expect the current account balance to post a deficit of USD10.4bn in March. We estimate that the balance-of-payments-defined trade deficit will increase to USD9.9bn, while net income from the travel item will register a limited uptick to USD2.1bn. The services balance surplus is projected to come in at around USD2.4bn. Following the rise in energy prices in the aftermath of US – Iran tensions, we have revised our year-end current account deficit forecast to USD45bn (2.6% of GDP). Yet, given the persistence of elevated global energy costs and the ongoing uncertainty, we note that risks to our forecast remain skewed to the upside.

* The CBT will release weekly foreign portfolio flows, money & banking statistics, and international reserves for the period of April 17 – 24 @ 14:30 local time. Based on our calculations derived from the CBT’s analytical balance sheet, we estimate that in the week of April 17 – 24, gross FX reserves fell by USD3.3bn to USD171.3bn, while net FX reserves declined by USD4.1bn to USD54.2bn. We expect today’s official data to point to a decline broadly in line with our estimates. To recall the previous week’s data: Foreign investors recorded net inflows of USD579.4mn into the equity market and USD243mn into the bond market (excluding repo transactions) in the week of April 10 – 17. Moreover, during the same period, the residents’ FX deposits (excluding gold, EUR/USD parity effect adjusted) increased by USD1.3bn, with the entire rise driven by corporate demand, while their total FX deposits (including gold, price-adjusted) posted a net increase of USD1.4bn.In terms of official reserves: The CBT’s gross FX reserves increased by USD3.6bn to USD174.5bn, net FX reserves rose by USD2.8bn to USD58.3bn and net reserves excluding swaps soared by USD7.6bn to USD39.6bn.

* The seasonally adjusted unemployment rate declined from 8.4% to 8.1% in March, while the broader underutilization measure that we closely monitor – the composite rate of labor underutilization comprising time-related underemployment, the potential labor force, and unemployment – rose markedly from 29.9% to 31.5%, reaching its highest level since June 2025. A breakdown of the components indicates that the combined rate of time-related underemployment and unemployment increased from 19.2% to 21%, while the combined rate of unemployment and the potential labor force edged down slightly from 20.5% to 20.4%. The rise in the broad underutilization measure to 31.5%, with levels hovering around 30%, points to a materially weaker labor market than implied by the headline unemployment rate. Given the expected drag on economic activity stemming from US – Iran tensions, we anticipate that the upward trend in broader labor market slack will persist in the period ahead.

* The economic confidence index declined to 96.4 in April from 97.9, marking its lowest level since July 2025. As a reminder, the index had fallen from 100.7 to 97.9 in March, reaching its lowest level since September. The index signals an optimistic outlook when it stands above the 100 threshold, while readings below this level point to a weaker overall sentiment. The latest print, remaining below 100, continues to indicate a subdued outlook for economic activity. A breakdown of the April data shows that the consumer confidence index increased by 0.5% to 85.5, while the real sector confidence index declined by 1.4% to 98.6. The services confidence index fell by 3.1% to 109.7, and the retail trade confidence index decreased by 1.8% to 111.6. In contrast, the construction confidence index rose by 3.6% to 83.6. Amid heightened uncertainty stemming from US–Iran tensions and rising expectations of a slowdown in economic activity, we expect the weak trend in confidence indicators to persist in the period ahead.