Dull economy, hectic politics

TURKEY - Report 11 Jan 2026 by Murat Ucer and Atilla Yesilada

This week’s political essays start with foreign policy developments, covering allegations of illicit relations between Maduro and Turkey, Iranian unrest and the beginning of the end in Syria in the showdown between Kurds and al Sharaa. Herein in the short-term good scenarios are few. In the first quarter of 2026 markets may be rattled by external shocks.

On the other hand, Trump seems sincere in wanting to persuade Congress to lift CAATSA sanctions, but it will take months before an elegant and face-saving solution can be found to get rid of Russian made S-400 missiles.

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Industrial production rose materially in November over the previous month, but for the two months combined (October-November), it fell over the previous quarter, pointing to the continuation of a volatile yet stagnant picture.

Turkstat’s seasonally-adjusted data suggest that the improvement in inflation trends is too slow for comfort, notwithstanding the CBRT’s efforts to put a positive twist on things.

On an encouraging note, the cash budget deficit finished the year at some 3.4% of GDP, we estimate, markedly down from 4.7% at end-2024. By the Ministry (accrual) definition, it was likely lower, on which we shall get to see data this week.

Now read on...

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