Turkish President and Justice and Development (AK) Party leader Recep Tayyip Erdogan speaks as he and his wife Emine Erdogan attend an election rally in Mardin, Turkey, May 10, 2023.
Turkish Presidency | Documents | Anadolu Agency | Getty Images
Turkey holds its presidential and parliamentary elections on May 14, and it could hardly come at a more polarized time for the country of 85 million people.
Just three months after devastating earthquakes that killed more than 50,000 people, the country that boasts NATO’s second largest armyHouses 50 US nuclear warheads, hosts 4 million refugees and took a key role in Russian-Ukrainian mediation is grappling with an economic crisis that has been brewing for years.
Incumbent President Recep Tayyip Erdogan is struggling for his political life after two decades in power, having served as Turkey’s prime minister from 2003 to 2014 and president from 2014. He rose to prominence as mayor of Istanbul in the 1990s and was celebrated in the first decade of the new millennium for transforming the Turkish economy into an emerging market power.
But recent years have been far less rosy for the conservative religious leader, whose own economic policies have sparked a cost-of-living crisis. Tensions between Turkey and the West are rising frequently, and international and domestic voices are sounding the alarm that Turkish democracy looks less democratic day by day.
“Under Erdogan’s leadership, Turkey has provided arguably the most striking model of how a state with plausible, functioning institutions and a relatively effective rule of law can be subsumed under the will of a ruling party and then a single individual,” Hussein Ibish, a senior resident scholar at the Arab Gulf States Institute in Washington, told CNBC.
“A Moment of Great Anxiety”
The frequent arrests of journalists, the forced closures of many independent media outlets and the heavy repression of past protest movements – as well as a 2017 constitutional referendum that significantly expanded Erdogan’s presidential powers – signal what many see as a shift towards autocracy.
Now, given the recent drop in support for Erdogan, some fear he is playing poorly to secure his grip on power. His main competitor is opposition leader Kemal Kilicdaroglu, leader of the center-left Republican People’s Party (CHP), who is running as a unity candidate representing six different parties who all want to see Erdogan out of power.
“This will certainly be the closest electoral contest Erdogan has faced since he came to power in 2002,” said Ryan Bohl, senior Middle East and North Africa analyst at Rane.
There is also anger at the government for its slow response to a series of devastating earthquakes in February that killed more than 50,000 people in Turkey and Syria, particularly over corrupt practices that allowed construction companies to circumvent building safety regulations. But the vast majority of Turks in the affected areas are longtime supporters of Erdogan’s party, the AKP, and appear to believe in Erdogan’s commitment to rebuild these cities within a year, analysts say.
The stakes are high for the whole country and, more broadly, global geopolitics – and the mood on the ground is tense. Opinion polls are very close, with most currently showing Kilicdaroglu in the lead, but not by much. Many wonder: if Erdogan loses, will he really leave?
Turkish President Recep Tayyip Erdogan speaks to the press after earthquakes of magnitude 7.7 and 7.6 hit the southern provinces of Turkey, on February 7, 2023 in Ankara, Turkey.
Mustafa Kamaci | Anadolu Agency | Getty Images
“I am very worried that [Erdogan] can deploy underhanded tactics, cheating and even violence,” Ibish said. “Of course, this can provoke extreme measures from the other side. So it’s a time of great anxiety.”
CNBC has contacted the office of the Turkish Presidency for comment.
The presidential election has two rounds. If no candidate wins more than 50% of the vote in the first round – which is widely expected to be the case – the vote moves on to a second round which will take place two weeks later.
Economy of Turkey: for a countdown
Turkey’s economy has been in a downward spiral for five years, during which its currency, the readlost 77% of its value against the dollar, inflation has exploded and unemployment has worsened significantly. Turkey’s official inflation rate is over 50%, although economists say it is actually over 100%.
“The economy is at the center of ordinary Turks’ concerns and is the driving force behind weakening support for the government,” Rane’s Bohl said. “If Erdogan and the AKP lose power, it will be almost entirely for economic reasons.”
Erdogan has largely refused to raise interest rates despite soaring inflation, insisting against economic orthodoxy that raising rates makes inflation worse, rather than the other way around. This, combined with costly central bank interventions to prop up the pound, which have led to dwindling foreign currency reserves, has driven foreign investors away from Turkey in recent years.
The current monetary tools that the Erdogan administration is using to give the economy a semblance of stability are unsustainable, economists warn, and after the election will have to come to a halt, likely leading to high volatility.
“The currency must collapse if it [Erdogan] wins, because there will be no trust and it has created this artificial scenario that cannot be sustained for an extended period of time,” Mike Harris, founder of Cribstone Strategic Macro, boldly predicted in February.
If the election goes smoothly, “I think we’re seeing an increase in investment in Turkey,” said George Dyson, senior analyst at Control Risks, adding: “That will be especially true if the opposition wins – that will show the credentials Turkey’s democratic institutions and allay concerns around the rule of law.”
But a number of challenges loom on the horizon: A potential breakup of the opposition alliance, if it wins, could “create negative dynamics around the economy”, Dyson warned. And worse, if the election result is contested by the loser, with allegations of electoral fraud, confidence in the economy will deteriorate significantly, he predicted.
View of the tourist area of Istanbul, Türkiye, on October 27, 2022.
Rita Franca | Nurphoto | Getty Images
Kilicdaroglu and his opposition coalition are proposing a very different economic path if they win.
“It is important for investors that the opposition wants to return to an orthodox monetary system over the heterodox policy of the administration in place,” Goldman Sachs analysts wrote in a research note Thursday.
Still, in either case, “overnight miracles should not be expected, as efforts to rein in inflation with higher rates would likely lead to short-term monetary shocks,” Hakan Akbas warned. , managing director of the consulting company Strategic Advisory Services, based between Istanbul and Washington. . “However,” he added, “a new political leadership with a credible and competent economic team will enjoy more support and patience from investors.”
What future for NATO-Ukraine relations?
Although Turkey is a longtime member of NATO, Erdogan’s trademark has been to quarrel with his Western counterparts, criticize them at home and strengthen ties with Russia. His frequent anti-Western rhetoric and continued pushback against Sweden’s bid for NATO membership has amplified tensions with European and American leaders – something Kilicdaroglu vows to reverse.
“Turkey is a member of the Western alliance and NATO and Putin knows that as well,” Kilicdaroglu said. told the Wall Street Journal in an interview this week. “Turkey must comply with the decisions taken by NATO.”
Kilicdaroglu “also wants to prioritize close economic relations with Europe in particular, while the current non-aligned political stance of the incumbent administration would likely continue,” Goldman Sachs analysts wrote in their note.
Turkish President Recep Tayyip Erdogan (L) meets with Russian President Vladimir Putin (R) during the 22nd meeting of the Shanghai Cooperation Organization (SCO) Leaders’ Summit in Samarkand, Uzbekistan, September 16, 2022 .
Anadolu Agency | Anadolu Agency | Getty Images
Yet Turkey’s spearhead in negotiations on the UN-brokered Black Sea Grains Deal, which helped ensure vital Ukrainian food exports reach the countries that need them, is set to end. continue, regardless of the candidate for power. The country’s analysts also believe that if Erdogan wins, he will eventually accept Sweden’s NATO membership and continue to try to mediate between Ukraine and Russia.
But the power of nationalism and Erdogan’s popularity in Turkey means that “even if he loses, his national presence and political influence will not be gone,” Ibish said.
“If Erdogan wins, of course, we can expect the same thing: a continuation under difficult conditions of Turkey’s NATO membership and relations with European states and other Western states. But this does not won’t be pretty.”