Macro and Politics

*TURKSTAT will release 1Q26 GDP figures today @ 10:00 local time. We estimate that the Turkish economy expanded by 2.7% y/y in 1Q26, while assessing the risks surrounding our forecast to be skewed to the downside. The market median forecast also stands at 2.7% y/y, broadly in line with our house estimate. It’s worth noting that, in light of the adverse effects of the US – Iran conflict on economic activity, we recently revised our 2026 year-end growth forecast down to 3.2% from 4.0%. However, we continue to believe that risks to our year-end projection remain tilted to the downside. Leading indicators suggest that the fragile tone in economic activity persisted beyond the first quarter. Rising energy costs and heightened uncertainty stemming from supply-side disruptions following the US – Iran conflict continue to weigh on both production and demand conditions. In addition, high-frequency indicators point to growth remaining below the 3% y/y level in the second quarter.

*Istanbul Chamber of Industry (ICI) Turkey May Manufacturing PMI will be announced @ 10:00 local time. The ICI Turkey Manufacturing PMI declined from 47.9 to 45.7 in April, marking its lowest level since October 2024. With the index remaining below the 50 threshold, the ongoing slowdown in manufacturing activity extended into its 25th consecutive month. The accompanying note highlighted that the impact of the Middle East conflict became more pronounced, with rising input costs, supply disruptions, and weakening demand weighing on production and new orders, while intensifying price pressures and lengthening supplier delivery times. Firms continued to scale back employment, purchasing activity, and inventories, with input stocks falling at the fastest pace in six years. The sectoral breakdown showed that only the wearing apparel and leather products sector recorded an increase in both output and new orders, pointing to a broad-based weakening across manufacturing. Meanwhile, the Bloomberg HT Consumer Confidence Index rose by 4.7% m/m to 71.3 in April, with both expectations and consumption tendency indices posting notable gains. We have revised our 2026 year-end growth forecast down to 3.2% from 4.0% amid the adverse effects of the US–Iran conflict. The PMI outlook suggests that weakness in manufacturing is likely to persist into 2Q26, while elevated cost pressures and soft external demand continue to pose downside risks to growth. Although consumer confidence improved in April, the extent to which this will translate into stronger domestic demand remains uncertain, and we maintain that risks to the growth outlook are skewed to the downside.