Türkiye.. How will the results of the presidential elections affect the country's economy?

Today, Monday morning, the media referred to the rapid reactions of both the Istanbul Stock Exchange and the exchange rate of the lira, following the results of the parliamentary and presidential elections that took place on Sunday.

In view of what the unresolved results indicate regarding the presidential election, and the going for a run-off between President Recep Tayyip Erdogan and his rival Kılıçdaroğlu, the Istanbul Stock Exchange index fell by about 6.4% with the beginning of trading today, Monday, and the value of the Turkish lira fell to 19.7 lira to the dollar, but it It improved its performance, rising to 19.65 per dollar.

These are normal results for the stock market and the exchange rate, because they are greatly and rapidly affected by political events, positively or negatively. However, the medium and long-term economic repercussions remain hostage to the results of the run-off in the presidential elections, which is scheduled to take place two weeks from now.

In terms of the exchange rate, it is noted that the lira pays a high price, which lacks natural economic justifications, as a large part of its decline is due to the continued phenomenon of dollarization, and the tendency of Turkish society to convert savings into dollars or buy gold, which makes the market in a state of constant anticipation, for any economic or social shocks. .

It is illogical for the value of the Turkish lira to decline in light of the continued progress of commodity exports and the increase in tourism revenues. Merchandise exports amounted to $23.6 billion at the end of last March, an increase of 4.4% compared to the same month last year.

Likewise, tourism revenues for Turkey during the first quarter of 2023 amounted to about $8.7 billion, an increase of 32% compared to the same period last year, and it was expected, at least if the value of the lira did not improve against other foreign currencies, to remain the same, without a decline .

Although some believe that the Turkish lira has gained its fortune from the political fight, and this opinion goes that there are speculations by some owners of political money internally and regionally, targeting the exchange rate of the lira during the last period, to negatively affect the opinion of the Turkish voter, to be against President Erdogan and his party, During the parliamentary and presidential elections.

electoral promises

The economy and its repercussions on people's lives were strongly present throughout the electoral competition period, as the opposition focused on the continuing high rates of inflation, and the competition of foreigners to citizens in obtaining job opportunities and public services, and openly announced its program regarding the deportation of foreigners, especially Syrians.

While Erdogan and the Justice and Development Party focused on the achievements made over two decades, and took control of the Turkish economy to be among the 20 largest economies in the world, and it was also noted that some economic indicators have improved recently, such as the decline in the inflation rate at the end of last April to 43.6. %, as well as the decline in unemployment to 10% at the end of last March.

The Turkish government also provided many economic and social benefits to citizens before the elections, such as raising the minimum wage for government workers, as well as providing gas service to homes, for all citizens, free of charge for a year, and announced the continuation of its economic approach of adopting major projects, and technological upgrading in various fields of production. .

Erdogan and the Justice and Development Party recalled their positive economic and social performance, in terms of external economic crises such as the Corona pandemic, as well as the negative repercussions of the Russian war on Ukraine. The party also reviewed its efforts in facing the catastrophe of the earthquakes in 2019 and 2022, and the services it provided to those affected.

future economic policies

The Turkish economy was distinguished during the last period by an economic policy that relied on reducing the interest rate, in order to encourage investment, reduce production costs, as well as coexist with high inflation in order to reduce the unemployment rate, and to some extent this policy achieved its purpose, as the leading sectors of the Turkish economy maintained their Its positive performance such as commodity exports and increased tourism.

In the event that President Erdogan decides the expected run-off on May 28, we will be faced with the continuation of the same economic approach, and its results may be better in terms of a decrease in the inflation rate, an improvement in the exchange rate of the lira, and a decline in unemployment rates.

It will help the positive improvement of the Turkish economy during the coming period, due to the announced discoveries of oil and natural gas, which will change the energy cost equation in Turkey, and help it avoid fluctuations in the international energy market, and the consequent inflation problems.

As for the second scenario, with Kilicdaroglu winning the run-off, it will put everyone in front of the unknown, with regard to economic policies, as the opposition announced more than once its rejection of the policy of reducing interest rates, and it is also expected that Kilicdaroglu will have another point of view on the map of the economic relations of the Turkish state.

Kilicdar's victory puts the Turkish economy in front of an open scenario, which carries a state of instability at the level of institutions and economic policies, which have been stable in Turkey for more than two decades.

However, this scenario is limited by two things. The first is that the Turkish street may see Kilicdaroglu’s victory as an adventure that may jeopardize his achievements, and the second is that if he wins, there will be a political crisis, represented by the parliamentary majority achieved by the “public” coalition led by the Justice Party. and development.

Parliament will not cooperate with Kilicdaroglu if he wins, which will impede any new directions on the economic level, which makes the country's direction for early elections highly likely.

foreign investment

Over the past two decades, Turkey has bet on bringing in foreign investments, both Arab and Western, and has witnessed over the past decade an influx of Arab investments, by Arab immigrants, or by some Arab governments.

Kilicdaroglu has adopted a negative rhetoric towards the investments of some Arab countries, and if he is destined to win the presidency of Turkey, and implements what he said, it will greatly negatively affect the presence of foreign investments in Turkey, in addition to introducing the country into a legal spiral and compensation that causes the Turkish economy to become exhausted. As well as depriving the country of Arab investments.

Undoubtedly, the immigrants' investments, in the event of their exit from Turkey, will help increase unemployment rates, in addition to their impact on promoting Turkey's commodity and service exports, whether in the Arab or Western environment.

past fears

Some invoke the harsh economic experience of the Republican People's Party (CHP), now led by presidential candidate Kilicdaroglu, where economic conditions were very regressed, regardless of the negative repercussions imposed on the country by the 1999 earthquake.

Turkey's economic performance was modest, and its infrastructure was not good, in addition to high poverty rates, as well as the debt crisis, and Turkey's repeated resort – during the rule of the Republican People's Party – to the International Monetary Fund.

What calls for the concerns of economic activity partners, in the event of Kilicdaroglu's victory, is the future of the banking sector. Bankruptcy of banks was a recurring phenomenon, before the advent of Erdogan and the Justice and Development Party, while the phenomenon has disappeared since 2003.

And if the banking system is exposed to the risks of instability, this will negatively affect the capabilities of the Turkish economy, and resorting to the International Monetary Fund in the event of Kilicdaroglu's victory may be rejected by some, because they see it as imposing the fund's tutelage on the country.

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