Concerns over Turkish economy ahead of presidential runoff
As the Turkish presidential elections head for a runoff between incumbent Recep Tayyip Erdogan and opposition challenger Kemal Kilicdaroglu on May 28, the country’s weak economy continues to be the main focus of domestic and international attention. The cost of living situation in Turkiye has been significantly exacerbated by two years of staggering inflation, which was about 44% in April.
Turkiye’s sovereign dollar bonds and equities have also plummeted, and key economic players at home and abroad are anxious and uncertain about what awaits them next.
Current Economic situation
According to some experts, Erdogan’s economic policy goal would be built on maintaining the status quo through unconventional measures that employ a variety of methods to keep the economy afloat. They also warn that Turkiye’s economic predicament cannot be continued and that a change of course is required.
Erdogan’s likely success in the runoff vote indicates that his existing economic policies will be maintained, with only minor adjustments, such as assigning new officials to key economic roles, expected in the event of further financial volatility.
Presidential election win
In case Erdogan wins and continues with his existing economic policies, the demand for hard currencies is expected to increase sharply and trigger a real currency shock, which would require alternative sources of external financing.
Emre Peker, Europe director for Eurasia Group, thinks that Erdogan’s team is likely to support stability in Turkish markets in the lead-up to the runoff, where he is likely to secure re-election.
As Erdogan’s ruling Justice and Development Party and its People’s Alliance secured an outright majority in Sunday’s parliamentary elections, they are expected to continue with the current economic policies. Experts warn that insistence on low interest rates could push the lira further down, but on the other hand, any meaningful hike in interest rates to curb inflation would also bring recession to the economy.