Playing For Time
Growth was likely positive in Q1, and should finish the year at around 3% with risks tilted to the upside, assuming a flat second half or that a major contraction will be avoided. We see growth slowing further in 2025, however.
• Inflation, broadly in line with the consensus, should peak at just under 75% in May, before easing to around 46% by the end of this year. It should prove quite sticky thereafter, though, decelerating to some 35-36% by end-2025, we reckon.
• Monetary policy entered a “wait-and-see” mode in April, but we think the next rate move is more likely to be up, than down. Reserves have generally been improving since the elections, and we forecast a relatively modest current account deficit for this year (around 2% of GDP), but we don’t see the reserve dynamic lastingly improve, nor do we see monthly inflation drop to the CBRT’s forecast path.
• The central government budget worsened through Q1, and our back-of-the-envelope calculations suggest it could, without measures, finish the year at around 5% of GDP, up from some 3% in 2023 (adjusted for the December jump in accrual data), implying a fairly expansionary fiscal stance.
• The current momentum, combined with the fact we have an election-free 2.5 years at a minimum, according to our politics author, could help Ankara to muddle through this year without accidents -- and with a few rating upgrades.
• But 2025 is another matter: The Treasury and Finance Minister Mr. Simsek & Co. have a gargantuan task ahead, which could get particularly tricky later this year/early next, as a stagflationary picture and somewhat stronger TL could lead to revolt from the business community or from the public at large.
• Our politics author lays out three scenarios and says that the next few months will be critical in shaping which way we shall be heading.
• As a follow-up to our recent webinar, we are sending our quarterly/forecast report in presentation format, starting with a detailed take on politics, before moving to economics. There is no Weekly today.
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