Macro and Politics

* TURKSTAT will release April inflation figures today @ 10:00 local time. We expect monthly CPI inflation to come in at 3.3% in April, broadly in line with the market consensus, lifting annual inflation from 30.9% to 31.3%. Our price tracking suggests a renewed acceleration in food inflation, with monthly food prices likely rising by around 3.5%. We estimate that the 25% hikes in electricity and natural gas prices implemented at the beginning of April will add approximately 0.6pp directly to headline inflation, with indirect effects gradually pushing the total impact to around 1pp. We maintain our year-end CPI forecast at 28%.

* According to TURKSTAT foreign trade data, exports declined by 6.4% y/y to USD21.9bn in March, while imports increased by 8.2% y/y to USD33.1bn. Accordingly, the trade deficit widened to USD11.2bn in March from USD9bn in February, as the effects of heightened US–Iran tensions began to materialize. While the increase in the trade deficit was largely driven by higher gold and energy imports, core indicators suggest that domestic demand-driven pressures have also become more pronounced. A breakdown of the core data shows that exports excluding energy and gold fell by 5.5% y/y to USD20.3bn, while imports rose by 11.2% y/y to USD25.7bn. Accordingly, the external trade balance excluding energy and gold posted a deficit of USD5.4bn. In the first quarter of 2026, the trade deficit increased by 27.5% y/y to USD28.7bn, while the export-to-import coverage ratio declined to 68.8% from 74.4% in the same period last year. We expect the current account balance to post a deficit of USD10.4bn in March. 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. Foreign trade data also provide important signals regarding the outlook for industrial production. The recent trend in imports of intermediate goods excluding energy and gold points to a loss of momentum in industrial output in March. Another leading indicator, the Istanbul Chamber of Industry (ICI) Türkiye Manufacturing PMI, declined from 49.3 to 47.9 in March, reaching its lowest level since October and signaling a weakening in manufacturing activity. Taken together, these indicators suggest a mild contraction in industrial production in March, following the notable rebound observed in February.