ANKARA: As the Turkish presidential election approaches a runoff on May 28 between incumbent Recep Tayyip Erdogan and opposition candidate Kemal Kilicdaroglu, the country’s failing economy remains the main focus of domestic and international attention.
In Turkiye, staggering inflation over the last two years, which was at over 44 percent in April, and surging food prices have significantly exacerbated the cost of living crisis.
Turkiye’s sovereign dollar bonds and stocks have also plunged, and significant economic players both at home and abroad are worried about what comes next.
Around 40% of total bank deposits are held in foreign exchange and gold accounts, while the one-year international trade deficit is at an all-time high of $120 billion.
According to some experts, Erdogan’s economic policy goal would be built on maintaining the status quo through unconventional measures that employ a variety of methods to keep the economy afloat.
They also warn that Turkiye’s economic predicament cannot be continued and that a change of course is required.
Erdogan’s likely success in the runoff vote indicates that his existing economic policies will be maintained, with only minor adjustments, such as assigning new officials to key economic roles, expected in the event of further financial volatility.
The appearance of former economy czar Mehmet Simsek on Erdogan’s campaign tour raised worries about whether Erdogan will return to traditional policies if elected.
Turkiye’s central bank governors have been replaced several times in recent years as part of a policy of not raising interest rates.
The election of Kilicdaroglu, a career civil servant and economist, is anticipated to stimulate the economy by attracting international investment.
To accomplish this, the 74-year-old opponent must expand his network of supporters in two weeks in order to attract more people and re-energize his base to vote.
According to Timothy Ash, an economist and analyst at BlueBay Asset Management, the Turkish Central Bank, or CBRT, will keep the lira stable until the elections, possibly below 20 lira per dollar.
“With foreign selling, credit markets will be weak and vulnerable.” “I believe the lira will weaken significantly after the elections, and we will see how the CBRT reacts in terms of hiking policy rates or not,” he told Arab News.
If Erdogan wins and maintains his current economic policies, demand for hard currencies is projected to rise substantially, resulting in a real currency shock that would necessitate alternative sources of external finance.
Emre Peker, Europe director for Eurasia Group, believes Erdogan’s team will maintain market stability in Turkey in the run-up to the run-off, where he is expected to win re-election.