Turkey: Erdogan remains favorite to win snap elections
May 30, 2018
Incumbent President Recep Tayyip Erdogan remains the likely winner in the first round of presidential elections to be held on 24 June. However, he may fall short of the 50% vote threshold needed to avoid a second-round runoff, where his victory would be far less certain. If Erdogan emerges victorious, it is unclear whether his government would revert to a more conventional economic policy and reduce fiscal stimulus which has caused inflation to spike in recent months.
A victory for one of the opposition candidates would likely create a period of policy uncertainty given the current lack of clarity over economic proposals. However, this scenario could be positive for the Turkish lira—which has depreciated markedly this year—due to reduced fears of government control of monetary policy. The elections will usher in a presidential system of government, abolishing the role of prime minister and giving the president sweeping new powers.
Erdogan’s manifesto, launched on 6 May, was short on specific economic policy measures. However, the candidate pledged to cut interest rates, inflation and a current account deficit which has ballooned due to a surge in domestic demand. Some analysts expect a reduction in expansionary fiscal policy in the case of an Erdogan victory, although the roughly USD 40 billion of stimulus measures announced by the government since April cast doubt on this idea. Regarding monetary policy Erdogan allowed the Central Bank to hike rates and promised to adhere to global monetary principles following the selloff of the lira on 23 May. However, there is still uncertainty over whether going forward he will be prepared to allow the Bank to tighten its stance to the degree needed, given his long-running aversion to high interest rates.
With the opposition fielding several presidential candidates, polls point to a comfortable victory for Erdogan in the first round. He still retains significant support among more religious and socially conservative elements of the population, and benefits from control of the media. In addition, although high inflation and a weaker lira are concerns for some voters, the economy continues to expand at a robust pace, while recent instability in the FX market hasn’t filtered through in a major way to the real economy.
Of the opposition candidates, Muharrem Ince, and Meral Aksener have the greatest chance of reaching an eventual second-round runoff. Muharrem Ince is the candidate of the secular, center-left CHP—the main opposition party in parliament—which has solid support among the urban middle class. However, the party has historically performed poorly among more religious elements of society and Kurdish people. Ince has spoken out in favor of a return to a parliamentary system of government, and his manifesto includes promises to raise the minimum wage and pensions, and offers financial handouts to other economic sectors.
Meral Aksener is running for the center-right Iyi party, which was founded late last year. Aksener has ample political experience, including at the highest level—she briefly served as interior minister in the 1990s—and was formerly a member of the right-wing MHP. She garners more support among conservative, religious voters. She has also pledged to revert to a parliamentary system of government, as well as rebuild relations with the EU which have suffered severely since the failed 2016 coup attempt.
Although an opposition candidate is highly unlikely to win the first round, a second-round victory is possible, as all opposition parties would likely rally round Erdogan’s opponent; indeed, both Ince and Aksener have already called to vote for the opposition candidate in such a scenario.
Parliamentary elections, also to be held on 24 June, will likely be much more closely fought. Four main opposition parties—including the CHP and Iyi—will run as a coalition, overcoming the rule requiring parties to win 10% of the vote to enter parliament. This should boost their chances of challenging the hegemony of the ruling AKP party, which is also running in coalition with the MHP.
Author: Oliver Reynolds, Economist