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Turkish economic and financials developments 

Domestic demand slows down; price increases decelerate
24 June 2024

The recent slowdown in the manufacturing sector continued in June



Significant contribution to the budget from seasonal increase in corporate tax revenue
20 June 2024

In May, central government budget balance recorded a surplus of 219.4 billion TRY and a primary surplus of 330.1 billion TRY. This brought the cumulative budget deficit for the first five months of the year to 472 billion TRY and for the last 12-months to 1.58 trillion TRY. .



Improving exchange rate expectations did not improve inflation expectations
14 June 2024

The recent stability has led to a downward adjustment in exchange rate expectations, which decreased to 37.8 from 38.8 for the year-end, and to 41.4 from 41.8 for the next-12 months. Expectations regarding the monetary policy stance and economic growth remained unchanged from last month. Yet, there was no significant change in inflation expectations.



Macro: Bridge day effects negatively affected industrial production
10 June 2024

The Industrial Production Index (IPI) declined by 4.9% mom and 3.4% yoy in April. In April, industrial production was negatively affected by i) 1 less working day compared to April last year, ii) sharp declines in sectors with historically high volatility, and iii) bridge days due to the combination of Ramadan Eid (April 10-12) and April 23 holidays with the weekend.



Current account balance deteriorated further in April; but will improve again in May
10 June 2024

The current account balance posted a deficit of $5.3 billion in April, below expectations. The 12-month cumulative deficit increased slightly to $31.5 billion.



Stickiness in services inflation persists; underlying trend still strong
03 June 2024

In May, consumer prices increased by 3.37% and annual inflation rose from 69.8% to 75.4%. Thus, inflation was realized above the midpoint of the CBRT Inflation Report forecast band (≈ 75.0%). The technical correction due to the end of the subsidy for household natural gas consumption as of May 1 added 0.64 pp to monthly inflation. Even when this effect is removed, the monthly CPI inflation trend falls to 3%.



Sharp correction in external balance
03 June 2024

According to the provisional statistics of the Ministry of Trade, the foreign trade balance posted a deficit of $6.5 billion in May, while the 12-month cumulative deficit narrowed to $87.1 billion from $93.0 billion.



Slowing demand conditions become more apparent; cost pressures ease
03 June 2024

Istanbul Chamber of Industry Turkey Manufacturing Purchasing Managers' Index (PMI) decreased by 0.9 points mom to 48.4 in May, the lowest level since the end of 2023. Thus, while the slowdown in manufacturing activity became more pronounced, this slowdown was driven by the reflection of weakening demand conditions on production. In parallel, the employment outlook also deteriorated.



Both domestic demand and net exports drove growth in Q1
31 May 2024

Gross domestic product (GDP) increased by 5.7% in the first quarter, in line with our expectations and those of the market. Quarter-on-quarter growth was strong at 2.4%. After this strong quarterly performance, the question is whether the recent tightening steps will lead to a slowdown in the second quarter.



Policy rate unchanged; steps taken to accelerate the exit from KKM, support monetary transmission and tighten credit conditions
23 May 2024

CBRT kept the policy rate unchanged at 50% in May, in line with expectations. However, CBRT announced in a press release after the decision that it took additional steps to maintain macro financial stability, support the monetary transmission mechanism and sterilize excess liquidity.



Disinflation path remained mostly intact
09 May 2024


In the 2024-II Inflation Report, the CBRT updated its 2024 year-end inflation forecast from 36% to 38%, while keeping its 2025 and 2026 year-end forecasts unchanged at 14% and 9%, respectively (Chart 1). The uncertainty band around the year-end forecast was set as 34%-42% for 2024 and 7%-21% for 2025.



Macro: Demand conditions limited production in manufacturing industry
02 May 2024

Istanbul Chamber of Industry's Turkey Manufacturing Purchasing Managers' Index (PMI) decreased by 0.7 points to 49.3 in April, returning back to contraction zone after two months.



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



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%.



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.


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