Macro and Politics

* The CBT will release the results of the Survey of Market Participants for October @ 10:00 local time. According to the CBT’s September 2026 Survey of Market Participants, respondents revised their year-end CPI inflation expectations upward to 29.6% from 29.4% for 2026 and to 22.7% from 21.9% for 2027. The 12-month-ahead inflation expectation remained unchanged at 23.7%, while the 24-month-ahead expectation edged up to 18.3% from 18%. The five-year-ahead inflation expectation rose more notably to 12.1% from 11.1%. Following the softer-than-expected September CPI print, we believe the 12-month-ahead inflation expectation could see a modest downward adjustment in the next survey.

*TURKSTAT will release September housing sales figures @ 10:00 local time. Total house sales declined by 14.7% y/y to 127,410 units in August. First-hand house sales fell by 4.5% y/y to 44,378 units, while second-hand house sales contracted by 19.4% y/y to 83,032 units. Mortgage-backed sales, meanwhile, increased by 7.2% y/y to 22,131 units, although their share in total house sales declined to 17.4% from 19.3% in July. Turning to financial conditions in the housing market, the average mortgage rate rose to 41.99% in August from 41.46% in July, compared with 40.36% in August 2025. With annual growth in mortgage-backed sales slowing further in August, we maintain our view that elevated financing costs continue to constrain credit-driven housing demand.

* The CBT will release the Residential Property Price Index (RPPI) for September @ 10:00 local time. The Residential Property Price Index (RPPI) increased by 0.9% m/m and 23% y/y to 236.8 in August, while declining by 6.5% y/y in real terms. The New Tenant Rent Index (NTRI) rose by 2.3% m/m and 26.4% y/y to 336.2, while recording a 3.9% annual decline in real terms. The August data indicate that both residential property price and rent growth continue to lag inflation, with the real declines in both measures becoming more pronounced.

* Credit rating agency S&P has scheduled a sovereign rating review for Turkey today. It is worth noting that scheduled review dates do not necessarily result in the publication of a rating report or a new rating action. Any potential announcement would be expected after market close. In its latest review on April 17, 2026, S&P affirmed Turkey’s long- and short-term foreign- and local-currency sovereign credit ratings at BB-/B, maintaining its stable outlook. We do not expect S&P to make any changes to Turkey’s sovereign ratings or stable outlook in today’s scheduled review. Please note that Moody’s, S&P and Fitch currently rate Turkey three notches below investment grade, all with stable outlooks.

* Foreign investors recorded net sales of USD248.2mn in equities during the October 2–9 week, while purchasing USD451.1mn in bonds (excluding repo transactions). Equity outflows extended into a second week, bringing cumulative net foreign sales over the two-week period to USD438mn. In the bond market, foreign investors returned to net buying after three weeks of selling. Foreigners’ share in the total bond stock remained unchanged at 6.6%, its lowest level in three months. Residents’ FX deposits (excluding gold and adjusted for the EUR/USD parity effect) increased by USD294mn during the October 2–9 week, while total FX deposits (including gold, adjusted for the price effect) increased by USD324mn. The CBT’s gross reserves rose by USD4.2bn to USD171.6bn during the October 2–9 week, ending a six-week streak of declines. Net reserves increased by USD4bn to USD57.7bn. Meanwhile, the swap stock fell by USD2.4bn to USD13.5bn, lifting net reserves excluding swaps by USD6.4bn to USD44.1bn.

* The central government budget posted a deficit of TL532.2bn in September, alongside a primary deficit of TL269.2bn. The cumulative budget deficit reached TL1.8tn in Jan–Sep, corresponding to 67.8% of the full-year target of TL2.7tn. On a trailing 12-month basis, the deficit widened to TL2.4tn from TL2.2tn. Budget revenues rose by 22.7% y/y to TL1.3tn in September, lagging annual CPI inflation of 29.7%. Tax revenues increased by 21.8% y/y to TL1.1tn, with domestic VAT collections rising by 34.8% y/y, suggesting some easing in the recent signs of cooling domestic demand. Meanwhile, SCT revenues from petroleum and natural gas products fell by 24.5% m/m, despite the partial restoration of the fixed SCT on diesel. Total expenditures increased by 34.1% y/y to TL1.8tn, with primary spending up 39.1% y/y and interest expenditures reaching TL263bn. We estimate that the échelle mobile mechanism will result in approximately TL500bn in foregone tax revenues in 2026, including the associated VAT impact. As the mechanism is gradually phased out and fixed SCT rates on diesel are restored, we expect fuel-related tax revenues to recover in 4Q26. Nevertheless, revenue growth remaining below inflation and persistently elevated interest expenditures continue to weigh on the fiscal outlook. We maintain our 2026 budget deficit forecast at TL2.8tn, equivalent to 3.3% of GDP.