Gedik Investment: Sharp Reserve Losses and Rising Dollarization Pressures

Türkiye’s monetary indicators point to renewed pressure on reserves, rising FX demand, and weakening local currency deposits, according to Gedik Investment’s latest weekly report. A sharp decline in reserves, continued foreign outflows, and increasing FX deposits highlight growing stress in financial conditions despite a still-controlled dollarization ratio.

Reserves See Significant Weekly Decline

Gedik Investment reported a notable deterioration in reserves during the week of March 19:

• Net reserves (excluding swaps) fell by $10.6 billion
• Adjusted for gold prices, the decline was $4.2 billion

According to the CBRT’s analytical balance sheet (as of March 25):

• Gross reserves declined by $16.8 billion
• Net reserves (excluding swaps) dropped by $18.2 billion

Even after adjusting for gold price effects, the fall in net reserves excluding swaps is estimated at $16.3 billion.

FX Deposits Continue to Rise

Foreign currency demand remained strong:

• FX deposits increased by over $0.8 billion during the week
  • Households: +$314 million
  • Corporates: +$525 million

Since the start of 2025, total FX deposits have risen by $26.8 billion, signaling persistent dollarization pressure.

TRY Deposits Decline Sharply

Local currency deposits weakened significantly:

• TRY deposits fell by TRY 177 billion in one week
• Total TRY deposits dropped to TRY 16.7 trillion

Despite this, the combined share of FX deposits and KKM in total deposits remained relatively stable at 40.7%, well below the 68.4% peak in August 2023.

Credit Growth Moderates

Loan growth indicators show a slowdown:

• Commercial loan growth: down from 31.8% to 27.8%
• Consumer loan growth: down from 41.9% to 33.3%

However, FX loans continued to expand:

• Weekly increase: $0.2 billion
• Annual growth since March 2024: +51.1%
• Total FX loan stock: $203.2 billion

Foreign Investors Continue to Exit

Non-resident investors maintained a selling trend:

• Government bonds: $130 million net outflow
• Equities: $137 million net outflow
• Eurobonds: $244 million net outflow

Over the past five weeks:

• Total bond outflows exceeded $5.9 billion
• Equity outflows reached $1.2 billion

This marks a clear reversal from earlier inflows seen at the start of the year.

Gold Reserves Decline Adds Pressure

Gold reserves also weakened:

• Gross gold reserves: down from 26.4 million ounces to 24.8 million ounces
• Net gold reserves: down to ~16 million ounces

This represents a reduction of roughly 50 tonnes, equivalent to about $8 billion.

Money Market Funds Expand, FX Funds Shrink

On the asset side:

• Money Market Funds (MMF) grew by TRY 142 billion, reaching TRY 1.5 trillion

However:

• FX-denominated funds declined by $906 million, falling to $77.4 billion

Despite these shifts, the overall dollarization ratio (including funds) remained stable at 43.2%, significantly below mid-2023 highs.

Outlook: Pressures Persist Despite Partial Stabilization

Gedik Investment’s report highlights a mixed picture:

Negative signals:

• Sharp reserve losses
• Continued FX demand
• Foreign investor outflows

More stable elements:

• Dollarization ratio remains contained
• Credit growth is moderating

Overall, the data suggests that while Türkiye has avoided a full return to peak dollarization levels, financial conditions remain under pressure, particularly through the reserve channel.