Elections in Turkey Erdogan loses ground over uncertain economic policy

Turkey’s current President, Recep Tayyip Erdogan, receives 49.39 percent of the vote, while his main rival, Kemal Kılıçdaroğlu, receives 44.97% after the presidential election held on 14 May, after processing 99% of the votes. Obviously, the winner will be determined in the second round on May 28. Recall that in the 2014 and 2018 presidential campaigns, Erdogan won in the first round.

The loss of the incumbent president’s positions is primarily due to problems in the economy. Focus “Erdogan’s hand. What kind of economy he built in Turkey and what this experience taught Ukraine,” he writes in his review.

Turkey’s future – expert opinion

Yegor Kıyan, an economic analyst at the International Center for Advanced Study, made a comment. FocusWhat Turkey’s economic policy during the Erdogan presidency appears to be a major economic experiment, with deviations from traditional methods and rules and a mix of religion, populism and strict manual control..

“During Erdogan’s rule, his approach to economic policy underwent radical changes. [имеется в виду период премьерства Эрдогана с 2003 года] Gleb Vyshlinsky, head of the Center for Economic Strategy (CES), said that Turkey has successfully completed two IMF programs, achieving macroeconomic stability and real GDP growth of 75% in 10 years.

At the same time, according to him, in the second decade of Erdogan’s rule, Erdogan began to intervene more and more directly in economic policy.

Vyshlinsky explained that Erdogan was convinced that in order to reduce inflation rates, as economic theory says, the central bank should not raise the discount rate, but lower it, and he destroyed this idea to put it into practice. political independence of the central bank, which has only had three presidents in the last two years.

Dmitry Churin, head of the analytical department of the investment company Eavex Capital, recalls that until 2013, Turkey’s GDP grew at a high rate due to the active attraction of foreign investment.

“However, in the last 10 years, the rate of entry of foreign investment into the Turkish economy has decreased significantly due to uncertain policies in the country. As a result, the attempt to replace foreign investment with cheap Turkish lira-denominated loans, the devaluation of the lira itself, and high inflation,” adds Churin.

As explained in comment Focus Alexander Martynenko, Head of Institutional Analysis Department at ICU GroupThe main idea of ​​Erdogan’s new Turkish economic model was to stimulate investment through cheap loans and support exports with the weak Turkish lira, but in reality low interest rates and cheap lira led to inflation.

So, a vicious circle has formed: the public and business are in a hurry to convert the Turkish lira into other currencies to protect their savings, thus causing its devaluation and even higher inflation.

To clarify, the discount rate has been gradually reduced from 19% to 8.5% in the last three years in Turkey. At the same time, inflation reached 64.5% in 2022, and the lira depreciated almost 45% in 2021 and 40% in 2022 against the US dollar. Indeed, it should be noted that against this background, the Turkish economy grew by 11.4% in 2021 and 5.6% in 2022.

“I would not have wanted an economic future for Ukraine like in modern Turkey in peacetime. But what has happened in Turkey in the last three years clearly shows that the country’s economy has not died from low rates, inflation and devaluation. Vitaliy Shapran, former member of the NBU Council, commented on the paradox of the situation.

According to respondents focus Whatever the likely outcome of the second round of the presidential elections, experts say, Turkey’s economic policy needs to change.

According to Alexander Martynenko, the opposition represented by Kemal Kılıçdaroğlu in his presidential campaign promises definitive reforms and the return of international capital to the country in case of victory. Behind this, there is a serious increase in interest rates. However, according to the addressee FocusThe economic situation in Turkey is so critical that even if Erdogan wins, his political power will have to raise the bar.

Previously Focus He analyzed who should win the elections in Turkey and how this will affect Ukraine.

Recall, on May 13, Turkish President Recep Tayyip Erdogan held his last election rallies in Istanbul, where he accused the opposition of collaborating to remove US President Joe Biden.