TURKEY: Weekly Flow of Funds

Summary

Central Bank of the Republic of Türkiye (CBRT) data for mid-December point to continued volatility in reserve dynamics, driven by shifts in FX deposits, portfolio flows, and gold-price effects. While the week of December 12 saw a strong increase in net reserves excluding swaps, early data for the following week suggest a partial reversal once gold-price adjustments are stripped out. At the same time, dollarization trends continue to ease, TRY deposits expand sharply, and FX loan growth remains robust, underscoring the complexity of Türkiye’s ongoing monetary normalization process.

Reserves and FX Dynamics: Weekly Snapshot

In the week of December 12, a USD 4.1 billion increase in net reserves excluding swaps (a USD 1.65 billion increase when adjusted for the gold-price effect), approximately USD 340 million in GDDS purchases by non-residents, and a USD 0.6 billion rise in FX deposits stood out. Additionally, based on the CBRT’s Analytical Balance Sheet data, as of December 17, we estimate a decline of approximately USD 0.7 billion in net reserves excluding swaps (a USD 1.3 billion decrease when adjusted for the gold-price effect). The weekly developments can be summarized as follows:

➢ Parity-adjusted FX deposits increased by a total of USD 603 million, driven by USD 176 million in purchases by households and USD 427 million by corporates. Since the beginning of the year, FX deposits have risen by a cumulative USD 18.4 billion.

➢ FX-protected deposit (KKM) balances declined by TRY 1.3 billion (approximately USD 32 million) on a weekly basis, falling to TRY 11.6 billion. The cumulative unwinding since the peak reached in August 2023 has reached TRY 3.4 trillion (USD 136.7 billion). We expect KKM accounts to be fully phased out in the coming days.

➢ The share of FX deposits + KKM in total deposits stood at 38.9%. This ratio had risen as high as 68.4% in August 2023, when KKM balances peaked.

➢ TRY deposits increased by TRY 661 billion during the week, reaching approximately TRY 16.2 trillion.

Credit Growth and Portfolio Flows

➢ FX loans rose by USD 1.8 billion on a weekly basis. Since the end of March 2024, FX loans have expanded by 46.9%, increasing by roughly USD 64 billion to reach USD 198.6 billion.

➢ Looking at the annualized 13-week average loan growth, commercial loan growth accelerated from 22.4% to 26.2%, while consumer loan growth increased from 50.5% to 52.1%.

➢ In the week ending December 12, non-residents made USD 340 million in net purchases of GDDS, raising the stock value to approximately USD 17.8 billion. Between mid-March and end-April, GDDS experienced cumulative outflows of USD 9.3 billion, while from early May onwards, cumulative inflows have reached approximately USD 8.8 billion.

➢ In equities, non-residents recorded USD 26 million in net purchases, pushing the stock value above USD 33 billion. On the Eurobond side, approximately USD 505 million in net sales were recorded, reducing the stock to around USD 81.8 billion.

Moody’s Forecasts Steady Growth for Türkiye as Inflation Gradually Eases

CBRT Reserves: Headline vs Gold-Adjusted Trends

➢ In the week of December 12, gross international reserves increased by approximately USD 4.4 billion, rising from USD 186.4 billion to USD 190.8 billion. Over the same period, net reserves rose by USD 2.0 billion to USD 79.6 billion. Net reserves excluding swaps increased by approximately USD 4.1 billion (a USD 1.65 billion increase when adjusted for the gold-price effect), reaching USD 66.2 billion.

➢ The lowest level of net reserves excluding swaps was USD –65.5 billion at end-March 2024, while the peak was USD 71 billion on February 14, 2025. It is worth noting that the increase in gold prices had an estimated positive impact of roughly USD 2.5 billion on reserves during the week.

➢ Based on the CBRT’s Analytical Balance Sheet, as of December 17 (covering the first three business days of the week), we estimate a USD 50 million increase in gross reserves, a USD 320 million rise in net reserves, and a USD 0.7 billion decline in net reserves excluding swaps. However, during this period, the gold-price effect was positive by approximately USD 0.6 billion. Accordingly, when adjusted for the gold-price effect, net reserves excluding swaps declined by roughly USD 1.3 billion.

Funds, Dollarization and Liquidity Conditions

➢ The size of the Money Market Fund (MMF) increased by approximately TRY 72 billion in the week of December 12, reaching TRY 1.45 trillion. Under the Free Umbrella Fund, MMF assets declined by approximately TRY 31 billion, falling to TRY 1.13 trillion.

➢ The total active size of FX-denominated mutual funds increased by approximately USD 144 million, reaching USD 77.7 billion. This figure stood at USD 25 billion at the beginning of 2024 and around USD 50 billion at the beginning of 2025.

➢ Including investment funds, the dollarization ratio declined from 42.5% to 41.8% in the week of December 12. This ratio had reached as high as 70% in mid-2023.