Info Investment: Inflation Expected to Drop to 28% by End of 2025, BIST100 Year-End Target Set at 14,500
Foreks - Info Investment has released its 2025 Strategy Report.
As one of Turkey's established brokerage firms, Info Investment has published the '2025 Strategy Report,' which includes macroeconomic expectations, domestic market forecasts for 2025, and sectoral outlook expectations. According to the report, growth is expected to be around 2.9% in 2024, while Turkey is anticipated to grow by 3.0% in 2025. The report discusses the possibility of inflation decreasing to 45% by the end of 2024 and 28% by the end of 2025, considering a tight and cautious stance in monetary policy.
According to the Info Investment Research Team, although there has been a noticeable stabilization in economic activity in the third quarter, factors such as uncertainty in service prices and the potential increase in commodity prices due to geopolitical tensions keep upward risks to the inflation outlook alive. This situation reaffirms the necessity for a tight and cautious monetary policy stance. Moreover, they continue to foresee an improvement in the overall trend of inflation as a result of weak momentum in economic activity and an ongoing real appreciation of the Turkish lira. They evaluate the possibility of inflation decreasing to 45% by the end of 2024 and to 28% by the end of 2025.
The report predicts that a cycle of interest rate cuts will begin. It states that Turkey's economy is undergoing a short-term stabilization process, where domestic demand conditions are expected to weaken further in their contribution to growth. On the other hand, anticipated easing steps in global financial conditions are expected to positively contribute to net exports, aiding the stabilization process. The report forecasts that growth will be around 2.9% in 2024, falling below the Medium-Term Program's target of 3.5%. For 2025, growth is projected at 3.0%.
According to the report, it is expected that the Central Bank of the Republic of Turkey will initiate the interest rate cut cycle at its Monetary Policy Committee meeting in December, lowering the rate by 250 basis points to 47.5% as the first step. In the first half of 2025, the difference between the policy rate and inflation is projected to average 500 basis points, narrowing significantly in the second half of the year, meaning that monetary policy will continue to be determined by inflation developments. While the historically low foreign participation rate in the bond market and the decline in CDS premiums create a positive view, it is noted that foreign inflows are sensitive to the net return on bonds, and there may be interest rate pressures in developed countries throughout 2025. The Research Team anticipates that the benchmark interest rate may start at 45% in the new year and end the year at around 30%. However, there is also the expectation that an above-expected increase in the minimum wage could delay the anticipated rate cuts.
The target for the BIST100 index by the end of 2025 is 14,500.
The report includes the following statements regarding the BIST100 index: "The BIST100 index started 2024 with momentum, but risk appetite has significantly declined in recent months. After the change in economic management, the rational steps taken have started to reflect in the numbers, and credit rating agencies' upgrades have partially increased foreign investor interest, leading the BIST100 index to set a record in TL terms during the year. Especially with foreigners metaphorically 'swimming in familiar waters,' the upward movement of the index accelerated, particularly led by the banking sector (which has the highest weight in the index) and the holding sector. After the second half of the year, however, the situation reversed. The increase in the policy interest rate, along with relatively risk-free instruments such as money market funds, has hastened exits from risky assets as they do not adequately protect investors against inflation. In August, concerns over a global recession and escalating geopolitical tensions overshadowed the BIST's gains from the first half of the year. The foreign perception from the first half of the year transitioned to selling pressure.”
Tarkan Akgül, General Manager of Info Investment, pointed out that the signals of interest rate cuts starting to be discussed domestically could shape a new narrative: “We believe that the interest rate cut cycle may accelerate the transition of foreign investors, who have been earning returns from high interest rates, into risky assets. Ratings upgrades by credit rating agencies, expectations of opening swap channels, the removal of the short selling ban on the BIST50, and the anticipated decrease in CDS may have a catalytic effect on the BIST. In this context, our target for the BIST100 index by the end of 2025 is set at 14,500.”