Turkey’s economic crisis expected to deepen after Erdoğan tops poll
Analysts expect Turkey’s economic crisis to worsen after President Tayyip Erdoğan came top in the first round of the country’s presidential election and his party gained a parliamentary majority in a legislative vote.
The Turkish lira, which has devalued steadily in recent years including halving in value in one year alone, dropped close to a historic low as markets opened the morning after Sunday’s vote.
President Erdoğan subverted expectations by coming out on top, gaining 49.5% of the vote in the presidential race compared with 44.9% for his challenger, Kemal Kılıçdaroğlu. As neither candidate reached the 50% threshold needed to win outright, a runoff vote will take place on 28 May.
Erdoğan’s governing alliance, made up of his Justice and Development party as well as a group of nationalist parties, also surged to secure a parliamentary majority.
Widespread concern about a cost of living crisis did not drive away support for Erdoğan at the polls, even though his unorthodox economic policies, including a long-term aversion to raising interest rates, have contributed to rising inflation and the increasing cost of food and other basic goods.
“Hopes of an opposition victory and a return to orthodox policymaking have evaporated,” wrote Liam Peach, of Capital Economics. “Instead, there is now a very real risk that an Erdoğan victory could lead to macroeconomic instability in Turkey, including the threat of a severe currency crisis and strains in the banking and sovereign debt positions further down the line.”
Turkey is the world’s 19th largest economy, according to the World Bank. It has noted that the Turkish economic crisis of the past five years has been accompanied by efforts to support economic growth “with credit booms and
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