Turkish local elections took place last week, in this article we briefly delve into Turkey's economic problems and wider shifts in political sentiment.
- Opposition party Republican Peoples party (CHP) won 37.8% of nationwide votes compared to Erdogan's Justice and Development Party (AKP) receiving 35.5%.
- CHP = 36/81 municipalities including wins in Ankara and the capital Istanbul
- DEM - Pro-Kurdish party - significant sway in Northeast of country
Erdogan's declining popularity comes as inflation rates soar in Turkey and a political shift towards liberal values occurs amongst younger voters, yet he still has another 4 years in office (He's been in power for over 20 years)
Inflation currently stands at 68.50% whilst interest rates are at 50%.
Primary Causes
- Current Account Deficit: Turkey is a net importer with the deficit at around $45.2 bn in 2023, a reason prompting the Lira (domestic currency) to depreciate as more foreign currency is purchased. The bulk of imported goods primarily includes Iron, Steel, Minerals, Machinery, Cars, and Plastics whereas the bulk of exported goods includes vehicle parts, electrical machinery, cars, petroleum, and jewellery.
Interest rates: The Central Bank on the behest of Erdogan's Government opted to keep lower rates despite increased inflationary risks in 2021 to weaken the lira/encourage exports and reduce the current account deficit whilst maintaining growth. This did not have the desired outcome and despite continued growth resulted in the deficit increasing.
After May 23, the Central Bank has adopted a very aggressive hiking stance (from 9%-50%)- to curb rapid inflation and the most recent hike possibly to influence local election sentiment. Yet these hikes have been broadly ineffectual with CPI rising over 12% in this same period with food and housing prices being the largest contributors.
-Lira: Remember a devalued currency (weakened Lira) makes imports more expensive (Cost-plus inflation) as well as increase domestic prices, the Lira has depreciated against the dollar by over 30% in the last year and is expected to depreciate even further.
- Parallel Exchange Rates: In Edition 6 we covered Parallel Exchange rates driving inflation in Egypt, Turkey is facing a similar problem and as the fourth most visited tourist destination globally, tourists and unofficial exchange dealers also play a part in distorting exchange rates and fuelling inflation.
On Erdogan
The recent local election has highlighted Erdogan's declining popularity.
- Islam? - Erdogan's Conservative party is shrouded in "Islamic values" and he seems to portray himself as a champion of Islam by constantly referring to Shariah. In 2020, he converted the Hagia Sofia into a mosque. In 2023 Erdogan was heralding himself as an "enemy of interest rates" (he said this!) consequently low rates are what created the current economic problem in Turkey. Those that know about Turkey's history will know that is meant to be a "secular nation” but it seems Erdogan has no problem skirting in and out of different political and religious positions as long as he looks good and gets votes while doing it.
- Palestine - Erdogan in the past consistently used the plight of Palestine for political expediency but as the conflict has accelerated Erdogan keeps shifting his stance to satisfy his political whims, despite him coddling Hamas leaders and threatening Netanyahu, Israeli imports increased in January.
- Kurdistan - But as Erdogan wages his war of words with Israel, he is a waging a very real war against the PKK in Syria and Iraq with reports of war crimes against Kurdish citizens by state sponsored forces in Turkish-occupied territories in Syria.
Similarly, the suppression and mistreatment of Kurds was demonstrated in the recent election, A pro-Kurdish party victory was initially blocked by the electoral body and an AKP candidate elected, however the Kurdish candidate was reinstated after widespread protests.
These are a few factors contributing to Erdogan's diminishing popularity, The opposition party CHP's opposition leader plans to visit Palestine on the 15th of April in solidarity with Palestinians and has vaguely stated that they will resolve problems with Kurdish people and are drawing up plans to save the economy. How and what these statement means is very unclear, not to mention another four years of Erdogan’s rule left.