Ankara (GPA) – President Recep Erdogan has won an election highly focused on the Turkish economy, but can he keep it afloat?
One of the main issues of the recent snap election in Turkey was the economy. Previously, the Turkish economy was the second fastest-growing economy worldwide but there are signs of a slow-down coming and with recent drops in the value of the Turkish lira, Erdogan, now an executive President has a new level of responsibility.
In the first two quarters of this year leading up to the snap election in Turkey, the Turkish economy has started to show signs that its recent years of record growth may be coming to an end. The largest of these red flags seen before the election was the rapid devaluation of the lira and double-digit inflation.
While the currency did recently see a spike after a massive bond sell-off (combined to a lesser extent with Erdogan’s win) and the economy has outperformed the lowered projections thus far it is still impossible to doubt that a major reason Erdogan, his Justice and Development (AK) Party, and their allies in the Nationalist Movement Party (MHP), called the snap election out of fear of where the economy may be headed. With the original general election set for next year, there can be no doubt that Erdogan wanted to secure his new executive powers (granted by the 2017 referendum but just enacted this term) before the political landscape became more hostile.
Erdogan clearly understood the way the economy factored into the election this time making several public statements on policies he would enact after the election, such as lowering interest rates – a task typically reserved for the nation’s central bank like in the US – to right the Turkish economic ship. Whether he will actually have the ability to do these types of grand maneuvers still remains to be seen but these may turn out to be counterproductive as many western economists claim Turkey actually needs to be considering a period of austerity at the moment. Erdogan’s plans to remedy the economy are also making investors nervous as they see these plans to change things like interests rates as curtailing the independence of the Turkish central bank.
Erdogan has now also placed the Turkish economy in opposition to some of its traditional allies such as the US as tensions have crumbled to a point where the US may consider keeping Turkey from taking their new F-35 fighter jets home. While nobody can be certain the best thing for Turkey will be austerity, when the western powers are angry at your country while simultaneously telling you to tighten your belt, you may be setting yourself up for low-intensity economic warfare.
This has already been seen to some extent with recent threats by the US to sanction Turkey for their plans to purchase the Russian S-400 anti-air missile system. If Ankara does go through with this purchase they will find themselves in violation of the most recent Russian sanctions passed by Congress punishing entities that work with Russian defense firms.
The US likely won’t be happy about having to decide whether they will sanction Turkey but this does seem like a decision they will have to make soon. Yet if Washington does follow through with punishing Ankara for buying the S-400s, Turkey should be wary because this could signal a willingness by the US to go further in punishing Turkey. There have already been warnings the purchase of the S-400 could tank the F-35 collaboration that Turkey is a member of so this should be taken as a sign that some sectors of the US are ready to move against Erdogan.
Turkey has also been swept up in US President Donald Trump’s trade war and has seen tariffs slapped on billions of dollars worth of Turkish exports to the US. Turkey obviously isn’t alone in this scenario, and much like the EU has begun the process of enacting retaliatory tariffs, but their position of isolation from the west as a whole could leave them more vulnerable than countries like Germany or France.
The Turkish economy and the imperial President
As for Erdogan himself, some of the factors dragging down the economy could be changed by him any time he chooses. Primary among these is the current state of emergency that was enacted after a failed coup in July of 2016.
Over these past two years, the state of emergency combined with Erdogan’s seemingly-erratic behavior has played a role in scaring off those with capital looking to make long-term investments in Turkey. Erdogan pledged during the election to end the state of emergency but he still maintains some many of the emergency powers under the new constitution that make investors nervous.
How Erdogan chooses to exercise these powers in the future will determine much of the foreign investment coming into the Turkish economy, which it depends on to a large extent. However, a majority of investment in Turkey still comes from the west so Erdogan will also have to balance his economic priorities with his confrontations with the west. Whichever way things go from here, the expanded powers Erdogan craved so badly are now his and that means so is much more of the responsibility for the Turkish economy. An imperial Presidency brings imperial responsibility.