Macro and Politics

* The Treasury and Finance Ministry will release September cash budget figures @ 17:30 local time. The Treasury cash balance posted a surplus of TL49.8bn in August, while the primary balance recorded a surplus of TL209.6bn. The central government budget also registered a surplus of TL12.9bn in August, alongside a primary surplus of TL209.9bn. The return of the budget balance to surplus was driven by a 17.2% m/m increase in revenues and a decline of more than 8% in expenditures, with the latter largely reflecting a marked drop in interest spending. We maintain our 2026 budget deficit forecast at TL2.8tn, equivalent to 3.4% of GDP.

* The CPI-based real effective exchange rate (REER) index increased by 0.45 points to 105.45 in September, implying a monthly real appreciation of around 0.4% in the Turkish lira, broadly in line with our estimate of 0.6%. Over the same period, the PPI-based REER index rose by 0.51 points to 101.62. An analysis of the underlying drivers of the CPI-based REER indicates that, on average, the US dollar and the euro appreciated by 1.63% and 1.08%, respectively, against the Turkish lira in September. Meanwhile, monthly CPI and domestic PPI inflation stood at 1.84% and 2.07%, respectively. Accordingly, the increase in domestic consumer prices exerted upward pressure on the CPI-based REER, while movements in the global CPI basket and the nominal exchange rate basket weighed on the index. The impact of domestic inflation ultimately prevailed, resulting in an increase of around 0.4% in the CPI-based REER in September.