On Monday morning, the media pointed 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.
Due to what the inconclusive results indicate regarding the presidential entitlement, and going to a run-off between President Recep Tayyip Erdogan and his rival Kilicdaroglu, the Borsa Istanbul index fell by about 6.4% with the beginning of trading on Monday, and the value of the Turkish lira fell to 19.7 liras to the dollar, but improved its performance to rise to 19.65 to the dollar.
These are normal results for the stock exchange and the exchange rate, because they are greatly and quickly affected by political events, positively and negatively, but the medium- and long-term economic repercussions remain hostage to the results of the run-off in the presidential elections, which are scheduled to be held two weeks from now.
At the level 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 due to the continuation of the 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 tremors.
It is illogical that the value of the Turkish lira will decline in light of the continued progress of merchandise exports and the increase in tourism revenues, as merchandise exports reached $ 23.6 billion at the end of March, an increase of 4.4% compared to the same month last year.
Turkey's tourism revenues 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 decline.
Although some believe that the Turkish lira has gained its luck from the political fight, this opinion goes to the fact that there is speculation by some owners of political money internally and regionally, targeting the exchange rate of the lira during the last period, to negatively influence the opinion of the Turkish voter, to be against President Erdogan and his party, during the parliamentary and presidential elections.
Election promises
The economy and its repercussions on people's lives were strongly present throughout the electoral contest, as the opposition focused on the continued high inflation rates, the crowding out of citizens for jobs and public services, and openly announced its program on the deportation of foreigners, especially Syrians.
While Erdogan and the Justice and Development Party focused on the achievements made over two decades, and took the reins of the Turkish economy to be among the top 20 economies in the world, and it was also noted that some economic indicators have improved recently, such as the decline in the inflation rate by the end of last April to 43.6%, as well as the decline in unemployment to 10% by 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 upgrading technology in various fields of production.
Erdogan and the Justice and Development Party (AKP) 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, and the party reviewed its efforts in facing the disaster of the earthquakes in 2019 and 2022, and the services it provided to those affected.
The future of economic policies
The Turkish economy was characterized 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 positive performance such as commodity exports and increasing tourism.
If President Erdogan decides on the expected run-off on May 28, we will be facing the continuation of the same economic approach, and its results may be better in terms of low inflation, improved exchange rate of the lira, and lower 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 equation of energy cost in Turkey, and help it avoid fluctuations in the international energy market, and the subsequent inflation problems.
As for the second scenario, with the victory of Kılıçdaroğlu in the run-off, it will put everyone in front of the unknown, with regard to economic policies, as the opposition has repeatedly announced its rejection of the interest rate cut policy, and Kılıçdaroğlu is expected to have another point of view in the map of economic relations of the Turkish state.
Kılıçdaar's victory puts the Turkish economy in front of an open scenario, which carries a state of instability at the level of economic institutions and 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 in Kılıçdaroğlu's victory an adventure that may ravage the achievements achieved, and the second is that if he wins, there will be a political crisis, represented by the parliamentary majority achieved by the "Republic" alliance led by the Justice and Development Party.
The parliament will not cooperate with Kılıçdaroğlu if he wins, which will hinder any new economic trends, making the country's direction to early elections highly likely.
Foreign Investments
During the past two decades, Turkey has bet on attracting foreign investments, both Arab and Western, and over the past decade it has witnessed an influx of Arab investments, by Arab immigrants, or by some Arab governments.
Kılıçdaroğlu has adopted a negative discourse towards the investments of some Arab countries, and if he is destined to win the presidency of Turkey, and implements what he declared, it will significantly negatively affect the presence of foreign investments in Turkey, as well as plunge the country into a legal spiral and compensation that causes fatigue in the Turkish economy, as well as depriving the country of the presence of Arab investments.
There is no doubt that the investments of migrants, if they leave Turkey, will help increase unemployment rates, as well as their impact on promoting Turkey's goods and services exports, whether in the Arab or Western environment.
Fears of the past
Some recall the harsh economic experience of the Republican People's Party (CHP), now led by presidential candidate Kılıçdaroğlu, where economic conditions have been extremely deteriorating, regardless of the negative repercussions that the 1999 earthquake imposed on the country.
Turkey's economic performance has been modest, its infrastructure is poor, poverty is high, its debt crisis is a debt crisis, and Turkey's repeated recourse to the International Monetary Fund (IMF) under the Republican People's Party (CHP).
What calls for the concerns of the partners of economic activity, in the event of Kılıçdaroğlu's victory, is the future of the banking sector, as bank bankruptcy was a frequent phenomenon, before the advent of Erdogan and the Justice and Development Party, while the phenomenon has disappeared since 2003.
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 Kılıçdaroğlu's victory may be rejected by some, because they see the imposition of the Fund's guardianship over the country.