Economy
Türkiye’s retail sales volume rises 11.5% annually in April
Retail sales volume in Türkiye surged in April compared to the same month last year, according to official data released Monday, marking the strongest growth among all subsectors and driving a 9.6% year-on-year increase in total trade volume.
Retail sales soared 11.5% year-on-year in April, according to the data from the Turkish Statistical Institute (TurkStat).
Among other subsectors, wholesale trade sales rose 8% on a yearly basis, while wholesale and retail trade and repair of motor vehicles and motorcycles volume increased by 13.8%, TurkStat said.
Monthly, retail sales rose by 2.8%, and trade sales and wholesale sales were down 3.1% and 6.1%, respectively.
A separate report by TurkStat on Monday, meanwhile, revealed that the total turnover index posted an annual gain of 32.7% in April.
Among sub-indexes, services increased by 42.1%, construction by 41%, trade by 34.6%, and industry by 22.7% on an annual basis in April. The highest increase was seen in administrative and support service activities, while the lowest was in manufacturing.
The turnover index also rose by 0.8% month-over-month in April.
Services went up by 7%, construction by 0.4%, and trade by 0.3% month-on-month in April, while industry turnover declined by 1.6%.
Türkiye’s current account balance posted a larger-than-expected deficit in April, driven in part by a widening trade gap, official data showed on Monday.
The shortfall came in at nearly $7.9 billion, the Central Bank of the Republic of Türkiye (CBRT) said, compared to a market forecast of about $7.5 billion.
Excluding gold and energy, the gap stood at $1.94 billion, the data showed.
The trade deficit reached almost $9.9 billion in April, compared to $7.7 billion a year ago.
“This expansion was mostly driven by worsening balances in both net gold trade and core trade items,” analysts at Dutch banking giant ING said.
Services posted a net inflow of $3.9 billion, with travel-related revenues contributing $3.09 billion, while direct investment recorded a net outflow of $268 million.
The data showed portfolio investments recorded a net inflow of $0.8 billion. Official reserves declined by a record $25 billion in April.
“The shift of secondary income into negative territory and lower primary income further exacerbated the deficit – despite continued growth in services income, which remained supported by revenues from transportation and tourism,” analysts at ING said.
From January through April, the current account deficit reached $20.3 billion, the CBRT data showed, compared to $14.6 billion a year ago.
However, preliminary data from the Trade Ministry do not suggest a major deterioration in the May current account, as the foreign trade deficit appears to have remained largely in line with the previous year, ING analysts said.
The 12-month rolling current account deficit now stands at $15.8 billion, or around 1.3% of gross domestic product (GDP).
Inflation in Türkiye is projected to drop below 30% by the end of the year, while the country’s central bank is expected to return to rate cuts as of next month, a latest survey showed on Monday.
Markets are forecasting inflation cooling to 29.86% by the end of 2025, according to the Survey of Market Participants for June by the Central Bank of the Republic of Türkiye (CBRT).
That is down from 30.35% in the previous month’s survey.
Aggressive monetary tightening since mid-2023, combined with favorable energy prices, has helped reduce Türkiye’s annual inflation rate by half over the past year.
The inflation lastly dipped to 35.4% in May, compared to around 75% a year ago.
The central bank has repeatedly cited expectations as one factor determining the course of its monetary policy.
The bank last month maintained its year-end mid-point estimate for the consumer price index (CPI) at 24%, with an upper band of 29%. Turkish officials continue to emphasize that inflation will remain within this forecast band.
Treasury and Finance Minister Mehmet Şimşek on Thursday cited stickiness in services inflation, which he said was preventing further improvement in headline CPI.
Still, Şimşek said inflation could end the year in the 20s, stressing a steep fall in basic goods prices.
The CBRT pivoted to raising its key policy rate by 350 basis points this April to 46% and pushed the overnight lending rate to 49% after Turkish assets and the lira fell sharply after Istanbul Mayor Ekrem Imamoğlu was jailed pending trial over graft charges.
Before that, the bank had begun an easing cycle and gradually cut its one-week repo rate to 42.5% in March as inflation fell from the level of more than 75% that it reached in May 2024.
The sharper-than-anticipated slowdown in inflation last month has reignited speculation that the bank could resume rate cuts soon.
Markets see inflation 12 months from now falling to 24.56%, the CBRT survey showed. That is down from 25.06% in the previous survey.
The 24-month-ahead forecast eased to 17.35%, down from 17.77%, the bank said.
Market participants expect the central bank to keep its benchmark one-week repo rate unchanged this Thursday but project a three percentage point cut in July.
They see the rate falling to around 40% in September before ending the year at around 36%. A year from now, the key policy rate is estimated to be around 29%.
Survey participants now expect the lira/dollar exchange rate to be 43.57 by the end of 2024, slightly below the previous forecast of 43.70.
However, the 12-month ahead forecast for the exchange rate increased to 47.04, up from 46.62 in the last survey period.
The Survey of Market Participants is conducted monthly. The panel consists of 72 participants, 54 of whom are experts in the financial sector and 18 of whom are experts in the real sector.
The European Investment Bank (EIB) on Monday announced 1.6 billion euros ($1.84 billion) of fresh funding for a major electricity interconnection between France and Spain, fulfilling demands by Madrid and Lisbon after the huge April blackout, which raised concerns over the state of power grids in Europe.
Experts believe the severity of one of Europe’s largest power outages, which paralysed the entire Iberian Peninsula on April 28, could have been mitigated with more interconnections between the neighboring countries.
The EIB said it would provide loans to the Spanish and French grid operators, Red Electrica and RTE, for the Bay of Biscay project, which will almost double power exchange capacity from 2,800 to 5,000 megawatts (MW).
The interconnection, already under construction and due to start in 2028, will stretch over 400 kilometers (249 miles), including 300 kilometers under the Atlantic, the EIB added in a statement.
On Monday, the first tranches of 1.2 billion euros ($1.4 billion) were signed at EIB headquarters in Luxembourg in an event involving the bank’s president Nadia Calvino, EU energy commissioner Dan Jorgensen and senior French and Spanish officials.
The European Union has set an interconnection target for member states of at least 15% of installed electricity production capacity by 2030 to improve the bloc’s energy security.
The blackout exposed Spain and Portugal’s relative lack of interconnections, with support from France and Morocco playing an important role in restoring power.
The Iberian neighbors sent a letter to the European Commission last month calling on the bloc to strengthen interconnections in a bid to avoid further blackouts.
The EIB’s backing for the Bay of Biscay project “will be key to ensuring that the Iberian Peninsula is no longer an energy island,” said Calvino, a former Spanish economy minister.
Greater energy integration is “an important area for EU competitiveness and strategic autonomy,” she added.
Authorities are still investigating the causes of the blackout.
A consortium led by Abu Dhabi’s state-owned oil firm has made a $18.7 billion takeover bid for Australian energy group Santos as it seeks to build a global natural gas giant, the two companies announced on Monday.
Santos’ board said it planned to unanimously recommend the Abu Dhabi National Oil Company’s (ADNOC) offer to shareholders if it can agree on the takeover terms.
Adelaide-based Santos operates in Australia, Papua New Guinea, East Timor and the United States, and is a major supplier of liquefied natural gas (LNG) in Australia and Asia.
The Abu Dhabi National Oil Company offered $5.76 a share in a bid for all of Santos’ outstanding stock, valuing the entire company at $18.7 billion.
The price per share is 28% higher than Santos’ closing level on Friday.
It was the “final, non-binding” offer from the Middle East oil company, which had offered two lower, confidential bids in March, Santos said.
Santos’ stock was more than 11% higher in afternoon trade on the Australian Securities Exchange.
The Abu Dhabi-based state-owned energy firm made its bid through a consortium led by its subsidiary, XRG.
Other members of the consortium include Abu Dhabi Development Holding Company and global investment firm Carlyle.
In a statement, XRG said it aimed to build on Santos’ legacy as a trusted energy producer, “strengthening domestic and international energy security.”
“The proposed transaction is aligned with XRG’s strategy and ambition to build a leading integrated global gas and LNG business,” it said.
Santos’ board said it intended to “unanimously recommend” that shareholders vote in favor of the deal if it can agree on terms and there is no better offer.
‘Strong scrutiny’
Santos said the “indicative proposal” by its Abu Dhabi suitor was subject to due diligence, agreement on terms and approval by regulatory authorities in Australia, Papua New Guinea and the U.S.
Approval by Australia’s foreign investment regulator will be a “major issue,” said Saul Kavonic, head of energy research at MST Marquee.
He expected “strong scrutiny” of the deal given that Santos owns critical gas infrastructure on Australia’s east and west coasts, and the Abu Dhabi National Oil Company’s status as a foreign government-owned entity.
It would be Australian Treasurer Jim Chalmers’ first big decision on a foreign government bidding for major critical infrastructure, Kavonic said.
The government may insist that some of Santos’ domestic gas assets be split off as a condition of a takeover, he said.
The Middle East-led consortium said its offer would leave Santos’ headquarters in Adelaide and vowed to work with existing management to accelerate growth and support local jobs.
The group said it planned to invest in Santos’ gas and liquefied natural gas business to provide “reliable and affordable low-carbon solutions to customers in Australia, the Asia Pacific and beyond.”
XRG said it would ensure Santos makes investments in carbon capture and storage projects, low carbon fuels and “other decarbonisation initiatives.”
Santos has been a rumoured takeover target for more than two years, said a report by E&P Financial Group.
The timing now felt “opportune” for a takeover offer, it said, with the risks weighing in favor of higher energy prices and Santos having completed some major investment projects.
Last year, Santos and rival Australian energy firm Woodside Energy abandoned talks to create one of the world’s largest natural gas exporters, after failing to reach a deal.
Shares of Japanese steel producer Nippon Steel rose on Monday after U.S. President Donald Trump approved its $14.9 billion bid for U.S. Steel, clearing a key hurdle in its 18-month pursuit and securing access to a vital market for its growth strategy.
The approval capped a tumultuous process marked by union resistance and two national security reviews.
Shares of Nippon, the world’s fourth-largest steelmaker, gained 3% to 2,915 yen by the midday break after being untraded with a glut of buy orders earlier in the day. They outperformed Tokyo’s benchmark Nikkei 225 index, which was up about 1%.
On Friday, Trump signed an executive order allowing the tie-up to proceed, contingent on an agreement with the Treasury Department addressing national security concerns. The companies then announced they had signed the agreement, effectively clearing the deal.
The agreement includes $11 billion in new investments by 2028, along with commitments on governance, production and trade. Nippon Steel also confirmed plans to acquire 100% of U.S. Steel’s ordinary shares.
“Investors have welcomed the resolution of uncertainty surrounding the deal,” said Shinichiro Ozaki, senior analyst at Daiwa Securities.
“Overall, the agreement appears relatively reasonable in both investment size and timeframe,” he said, noting the acquisition is central to Nippon Steel’s medium- to long-term growth strategy.
The deal would boost Nippon Steel’s annual production capacity to 86 million metric tons from 63 million tons.
“Shares rose on long-term growth expectations, driven by preferential access to the U.S. market, where steel demand is expected to increase,” said Masayuki Kubota, chief strategist at Rakuten Securities.
Still, some investors remain concerned about near-term financial strain from the sizable investments. Also, the U.S. government’s ownership in the combined company, known as the “golden share,” has raised questions about the degree of control it can exert.
“While the risk of a capital increase hasn’t completely receded, it may be less severe than expected,” Ozaki said, referring to Trump’s earlier comment that the steelmaker plans to invest $14 billion in the next 14 months.
Ozaki downplayed management risk linked to the golden share, saying, “Nippon Steel anticipates growth in the U.S. market for high-end products, making production cuts and job reductions unlikely.”
Major central banks around the globe are heading to a week of their respective committee meetings, trying to stay firm on their policy path and goals of keeping inflation at bay in the face of ever-growing risks – from U.S. President Donald Trump’s tariffs to fresh conflict in the Middle East.
The U.S. central bank will lead the way and is likely to announce after the second day of its meeting on June 18 that it would keep interest rates unchanged for a fourth straight time, despite Trump’s push for rate cuts, as officials contend with uncertainty sparked by the Republican’s tariffs.
While the independent U.S. Federal Reserve (Fed) has started lowering rates from recent highs, officials have held the level steady this year as Trump’s tariffs began rippling through the world’s biggest economy.
The Fed has kept interest rates between 4.25% and 4.50% since December, while it monitors the health of the jobs market and inflation.
“The hope is to stay below the radar screen at this meeting,” KPMG chief economist Diane Swonk told Agence France-Presse (AFP).
“Uncertainty is still very high.”
“Until they know sufficiently, and convincingly that inflation is not going to pick up” either in response to tariffs or related threats, “they just can’t move,” she said.
Later during the week, the Bank of England (BoE), the Central Bank of the Republic of Türkiye (CBRT), and the Bank of Japan (BOJ) would also share their decisions on the interest rates.
Both the BoE and the Turkish central bank have their monetary policy meetings (MPC) on Thursday at midday, while Japanese policymakers would gather on Friday.
The Bank of England has cut the U.K.’s official interest rate by a quarter point to 4.25% last month as it sees the potential impact of U.S. tariffs on growth.
Despite a divided 5-4 vote in favor of cutting borrowing costs, this decision has proven to be timely, as recent data showed that the output of the British economy contracted by 0.3% in April, the same month in which Trump introduced his sweeping tariffs on most nations.
Economists, however, expect the bank to pause its easing this week.
All 60 economists polled by Reuters expect the BoE to keep rates on hold at 4.25% this month, and almost all expect the next quarter-point rate cut to come in August.
So far, the central bank has taken what it calls a “gradual and careful” approach to cutting rates due to persistent inflation pressures and wage growth, only reducing rates four times, or every quarter, since August 2024.
Since returning to the presidency, Trump has slapped a 10% tariff on most U.S. trading partners, including the U.K. and Türkiye.
Higher rates in dozens of economies will take effect in July, unless an existing pause is extended.
Trump has also engaged in a tit-for-tat tariff war with China and imposed levies on steel, aluminum and automobile imports, rattling financial markets and tanking consumer sentiment.
Major financial institutions from the World Bank to the Organisation for Economic Co-operation and Development (OECD) have warned of a slowdown in global economic growth due to levies and accompanying uncertainty, which makes it difficult for companies and investors to plan long-term.
The World Bank in its latest report lowered the global growth forecast for 2025 by four-tenths of a percentage point to 2.3%, citing that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies. It projected that the global economy was set for its worst run since the 2008 financial crisis.
Coupled with other risks, including impacts on energy markets from fresh conflict between Israel and Iran, Israel’s ongoing Gaza attacks, as well as the Russia-Ukraine war, the central banks thus find themselves in a constant precautionary state with less space for maneuver.
CBRT likely to keep rate unchanged
The Turkish central bank is also expected to keep the policy interest rate unchanged this week, according to a recent poll by the Anadolu Agency (AA).
Despite inflation easing to the lowest since late 2021, the CBRT is likely to maintain rates at 46%, according to 19 of 23 economists polled by AA. Others projected a rise ranging from 100 to 350 basis points.
A rate cut is seen as a possibility at the next meeting on July 24, given that the bank is expected to restart its easing cycle this summer. Reuters poll shows that the easing cycle, once restored, would continue until at least mid-2026.
The average year-end forecast among the surveyed economists by AA is 35.5%.
Annual inflation in Türkiye eased to a lower-than-expected 35.41% in May, according to the official data.
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