TURKEY: President Tayyip Erdogan’s party won a majority in a legislative vote and won the country’s presidential election in the first round, leading analysts to predict that Turkey’s economic crisis would worsen. The Turkish lira has been rapidly losing value in recent years, nearly reaching a historic low when markets opened. It has decreased by half in only one year.
President Erdogan won the presidential election with 49.5% of the vote over Kemal Kılıçdaroğlu’s 44.9%. A runoff election will be held on May 28 due to neither candidate obtaining 50% of the vote. A coalition led by Erdogan’s Justice and Development Party and a collection of nationalist parties also made a strong showing to win a parliamentary majority.
Erdogan’s unconventional economic policies, such as opposition to raising interest rates, have caused inflation and rising costs, but voters still voted for him. Liam Peach of Capital Economics warned that an Erdogan victory could lead to macroeconomic instability, including a currency crisis and strains in the banking and sovereign debt positions.
The World Bank ranks Turkey as the 19th largest economy worldwide, and measures to stimulate economic growth have been taken. The Turkish central bank has spent $177 billion protecting the currency since December 2021. Inflation has increased by 105.19% in the most recent month and has increased by over a third since the year’s beginning.
Kılıçdaroğlu’s video claimed that one kilogramme of onions is 30 liras, and if Erdogan stays, it will be 100 liras. Erdogan downplayed worries about the rising cost of food at an electoral rally, stating that there is no shortage of onion, potato, or cucumber in Turkey.
Fitch Ratings has cited Turkey’s declining foreign reserves as a sign of a difficult economic environment, with pent-up demand for foreign currency, pressure on the lira, a current account deficit, dwindling foreign reserves, and high inflation.
The six-party opposition coalition in Turkey was unable to win the election due to a lack of foreign support for the Turkish economy. Bilge Yılmaz, an economist from the nationalist IYI party, warned that the current economic crisis may be worse than anything the nation has seen in decades.