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Erdogan Re-election, Türkiye’s Financial Challenges

Turkish President Tayyip Erdogan addresses his supporters in Istanbul on May 28. Murad Sezer/Reuters

BNR – Third Term of President Recap Tayyip Erdogan in Türkiye conveys a clear message to international leaders: politics supersedes a solid economy. The president’s 20-year tenure was not certain to be extended.

After a second-round vote on Sunday, he barely defeated rival Kemal Kilicdaroglu, an economist. Official results reveal that Erdogan received 52% of the votes, meaning that residents are strongly split over his return to power.

Erdogan’s triumph will almost certainly increase the country’s ongoing financial problems for over 80 million people. Annual price rises were 44% in April, owing to years of economic incompetence. This includes Erdogan’s utter refusal to allow the central bank to raise interest rates to combat inflation.

This will surely maintain the Turkish lira close to its all-time low. The currency is already six per cent lower than it was at the start of the year. Also, it has lost more than 90% against the US dollar in ten years.

Narrow Victory for Erdogan: Economic Consequences

Voters essentially scream no to the more severe short-term pain that would have occurred from a course adjustment and the realisation of his opponent’s pledge of better economics.

Returning to old fiscal dogmas would have resulted in a steep increase in interest rates, a potential recession, and significant disruption for companies and consumers in a country still reeling from the February earthquake that killed over 45,000 people and displaced a lot more.

Any longer-term, long-lasting financial crisis in Türkiye will be a challenge for its expanding range of supporters beyond the Group of Seven rich countries. A declining lira will make it more difficult for the government to repay foreign currency commitments. Western investors avoided Türkiye for a period of time.

Meanwhile, other countries are stepping forward to meet the country’s requirements. In recent years, Ankara has obtained $28 billion in currency exchange transactions from the UAE, Qatar, China, and South Korea. This assisted in relieving pressure on Türkiye’s central bank and markets.

In an era when geopolitics is at the forefront, Türkiye’s election outcome serves as a reminder to other leaders of countries preparing for elections. A strong economy is no guarantee of victory.


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