Macro: Stable outlook in manufacturing industry
24 April 2024
April Business Tendency Survey data indicated that the manufacturing industry did not record a significant change compared to last month's course, while investment goods-driven movements were particularly prominent this month.
More
Macro: No further interest rate hike expected from the Central Bank
19 April 2024
Although the deterioration in inflation expectations came to a halt in April following the higher-than-expected rate hike in March, the levels in all maturities (2024: 43.2%, 2025: 26.3%) remain above the CBRT's inflation path (2024: 36%, 2025: 14%, 2026: 9%). Despite this outlook, participants do not expect a further rate hike from the CBRT. However, the increase in the 12-month ahead policy rate expectation indicates that the CBRT is expected to move on a tighter path compared to last month.
The policy rates implied by the OIS curve for May and June is 53.5%-54.0%, which are above the expectations in the Survey. However, the flexibility in operational framework achieved by widening the interest rate corridor to 300 bps in the last MPC decision may allow for a tightening close to OIS pricing without any additional rate hike.
More
Macro: Partial deterioration in current account balance due to foreign trade
17 April 2024
Current account balance (CAB) posted a deficit of $3.27 billion in February, in line with our expectations. Thus, 12-month cumulative deficit narrowed to $31.8 billion from $37.6 billion thanks to the gold and energy imports-oriented base effect. In seasonally adjusted terms, CAB deteriorated slightly in February due to foreign trade balance. Ministry of Trade's provisional foreign trade data suggest that this deterioration continued in March. However, the first quarter averages point to a more favorable underlying trend (≈$17 billion) than the market expectations of around $30 billion for 2024. Therefore, we maintain our expectation that the current account deficit in 2024 will be much lower than the market forecasts. The course of oil prices due to geopolitical developments is an important risk factor on our forecast. On the financing side, capital inflows amounted to $2.0 billion in February thanks to the bond issues of the government, banks and other sectors, while reserves decreased by $6.2 billion due to the $5.0 billion outflow from the net errors and omissions item. CBRT's daily analytical balance sheet data indicate that the decline in reserves accelerated in March, but accumulation resumed in April.
More
Macro: Expansionary fiscal stance in Q1
15 April 2024
In March, central government budget balance posted a deficit of 209 billion TRY, while primary deficit was 134.4 billion TRY. Thus, 12-month cumulative total and primary deficits narrowed to 1.64 trillion TRY (5.5% of GDP) and 814 billion TRY (2.7% of GDP), respectively.
More
Macro: Underlying trend of industrial production in line with leading indicators
08 April 2024
Industrial Production Index (IPI) recorded a strong increase in February on both monthly and annual bases. The monthly increase was 3.2%, driven by a 1.9 pp contribution from the 50.6% increase in the production of other transport equipment, one of the sectors with the highest volatility. The high annual increase was also attributable to the leap-year effect (3.8 pp) and the low base due to the earthquake in February last year. Therefore, although the monthly and annual increase in the underlying trend of industrial production was lower than the headline, it was in line with leading indicators such as PMI and Business Tendency Survey, and displayed a wide sectoral spread. March PMI and BTS data as well as provisional data on imports of intermediate goods suggest that this upward trend will continue, albeit at a slower pace. However, the high base from other transport vehicles may cause the monthly increase in IPI to take a negative value in March.
More
Macro: Further widening in external deficit
04 April 2024
According to the provisional statistics of the Ministry of Trade for March, foreign trade balance posted a deficit of $7.5 billion in March, while 12-month cumulative deficit narrowed slightly to $92.0 billion.
More
Macro: Underlying inflation remains sticky
03 April 2024
In March, consumer prices rose by 3.16% and annual inflation increased from 67.1% to 68.5%, which is quite close to the upper limit of CBRT's forecast band. Although inflation trend is still high in seasonally adjusted (s.a.) terms, the impact of the wage adjustments at the beginning of the year is abating. Risks to inflation expectations and pricing behaviour remain intact. The distribution of monthly inflation of CPI 5-digit sub-indices indicate that pricing behaviour has not yet improved significantly.
The difference between underlying trend of goods and services inflation is noteworthy. While goods inflation improved relatively with the controlled nominal depreciation (s.a. 2.8%, annualized 40%), services inflation remains sticky (s.a. 5.4%, annualized 88%). This points out that the disinflation strategy based on real appreciation should be supported by a macro policy stance that will sufficiently curb domestic demand. Indeed, the deep negative output gap forecast in the Inflation Report imply a significant weakening in economic activity (2024 growth: ≈2%). Considering that high-frequency data signals an annual growth exceeding 5.0% in the first quarter, we believe that fiscal policy should focus on controlling domestic demand in a way to enhance the effectiveness of the current monetary stance. In this regard, public expenditure and tax policies as well as the incomes policy for the second half of the year will be of critical importance. On the other hand, administered prices are a significant source of uncertainty for the inflation path. The timing and the size of energy price adjustments will play a crucial role in managing expectations and the distribution of the burden on macro policies.
Despite the earlier and stronger policy rate hike in March than we had previously anticipated, we revised our year-end inflation forecast slightly downwards to 43.5% due to the upward revision in our oil price assumption. This forecast is based on the assumptions that (i) there will be no further monetary policy tightening beyond the room provided by the interest rate corridor, (ii) the primary budget deficit will be around 2% of GDP, (iii) the Turkish lira will appreciate slightly in real terms, (iv) Brent oil price will hover around $85 on average, (v) the projected increase in household electricity and natural gas prices will be distributed over time, (vi) there will be no further minimum wage adjustment by mid-year, and (vii) growth will slow down more moderately throughout the year compared to the Inflation Report projections. A tighter macro policy stance compared to these assumptions is the main downside risk to our forecast. We see the upside risks regarding the incomes policy alleviated compared to the previous month. Risks to the fiscal stance and administered prices remain significant.
More
Macro: Stable outlook for the manufacturing industry
01 April 2024
Istanbul Chamber of Industry's Turkey Manufacturing Purchasing Managers' Index (PMI) fell slightly to 50 in March, indicating that the outlook in the manufacturing industry remained similar to the previous month.
More
Macro: CBRT seems determined and target-oriented, policy rate 50.0%
21 March 2024
CBRT raised the policy rate by 500 basis points to 50% in March. The market expectation was that the policy rate would remain unchanged, but could increase within three months. The highlights and our evaluations are as follows:
- The Committee changed the operational framework and widened the interest rate corridor.
- The interest rate corridor (the spread that determines the overnight borrowing and lending rates), which was previously -/+ 150 basis points around the policy rate, was widened to -/+ 300 basis points.
- Thus, CBRT switched to a framework that allows for an additional tightening of 3 percentage points above the policy rate of 50%.
More
Macro: Domestic demand remains strong as of the last quarter
29 February 2024
In the last quarter, Gross Domestic Product (GDP) grew by 4.0% yoy and 1.0% qoq on a seasonally and calendar adjusted basis. Thus, growth in 2023 became4.5%. Domestic demand remained the main driver of growth in the last quarter. This indicated that, despite the tightening steps, the expected rebalancing across demand components had not yet taken place by the end of 2023. The gradual pace of interest rate hikes, the high course of inflation expectations, the expansionary stance of fiscal policy and wage increases cause domestic demand to remain strong.
More
Macro: Inflation forecasts were maintained with the change in the forward guidance on the monetary stance
08 February 2024
Forecasts
In the 2024-I Inflation Report, CBRT kept its year-end inflation forecasts for 2024 and 2025 at 36% and 14%, respectively, while sharing year-end inflation for 2026 as 9%. (Chart 1).
More
Macro: Manufacturing industry slightly improved
02 October 2023
Istanbul Chamber of Industry Türkiye Manufacturing Purchasing Managers' Index (PMI) rose by 0.6 points to 49.6 in September.
More
Weaker growth in Q1 than leading indicators implied
31 May 2023
In Q1, growth was weaker than our expectations and continued to be driven by domestic demand
More
Annual headline inflation increased to 83.45% yoy, with the core C hitting 68.09%
03 October 2022
CPI inflation was below the market expectations in September with 3.08% monthly increase. As a consequence, annual inflation rose from 80.21% to 83.45%, setting another yoy record in the revised series (2003=100).
The continuing upward trend in inflation was mainly driven by the contribution of housing, food, household equipment, restaurants-hotels and transportation. Core-B index also hiked by 2.74% MoM, bringing its annual rate to 74.63%, up from August’s 72.53%.
More
CBRT decision: Emphasis on risks on global growth and inflation
23 June 2022
Risks on global growth and already high global inflation continue. The divergence of monetary policy steps and communications of developed countries' central banks are increasing due to their diverse economic Outlook.
More