MILAN, May 29 (Reuters Breakingviews) – Tayyip Erdogan’s re-election in Turkey sends a clear message to world leaders: Politics trumps solid economy.
Extending the president’s 20-year term was not a matter of course. After a runoff election on Sunday, he narrowly defeated his challenger Kemal Kilicdaroglu, an economist. The official results released show that the incumbent strongman won 52% of the vote, suggesting citizens are deeply divided over his return to power.
Erdogan’s victory is likely to exacerbate several long-term financial problems for the country’s more than 80 million people. Annual price increases totaled a whopping 44% in April, reflecting years of economic mismanagement, including Erdogan’s exceptional reluctance to allow the central bank to raise interest rates to curb inflation. That will likely keep the Turkish lira near its record low; The currency is already 6% lower than at the start of the year and has lost more than 90% against the US dollar in a decade.
Voters are effectively saying ‘no’ to the more abrupt near-term pain that would have resulted from a course correction and the implementation of his opponent’s promise of sounder economic policies. A return to traditional fiscal dogma would have meant a sharp rise in interest rates, likely a recession and major disruption to businesses and consumers in a country just traumatized by February’s massive earthquake that killed over 45,000 people and many more were expelled.
Any longer-term, sustained financial chaos in Turkey will also pose a problem for the developing group of allies outside the Group of Seven Rich Countries. A weakening lira will make it harder for the government to repay foreign currency debt, but its risk on that front is small; Western investors have avoided the country for a while. Meanwhile, other governments are stepping in to meet its needs: Ankara has secured around $28 billion worth of currency swaps from the United Arab Emirates, Qatar, China and South Korea in recent years, helping ease the pressure on its central bank and its markets.
Erdogan’s victory also suggests that the country will turn further from the West. Despite being a member of NATO, Turkey maintained its ties with Moscow even after invading Ukraine. Russia, now shunned by European Union countries, accounted for 80% of Turkey’s crude oil imports in November. That pushes the country, which physically spans two different parts of the world, into even more unpredictable alliances. At a time when geopolitics takes center stage, Turkey’s election result is a warning to other leaders of nations preparing to go to the polls that a healthy economy is no guarantee of success.
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CONTEXT NEWS
Turkish President Tayyip Erdogan secured a new five-year term in the May 28 elections, defeating his challenger Kemal Kilicdaroglu.
Kilicdaroglu had promised a democratic reset and a return to orthodox economic policies in Turkey, which is struggling with hyperinflation, a weak currency and a cost of living crisis. He called the result “the most unfair election in years,” but did not dispute the result.
Official results showed that he won 47.9% of the vote against Erdogan’s 52.1%.
Edited by Una Galani and Pranav Kiran
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