Turkey’s second election this year has proven successful for President Recip Tayyip Erdogan: he consolidated his power, securing a larger parliamentary presence at the expense of the opposition his HD Party. Erdogan’s AK Party won nearly half the seats in the country’s legislative body.
The Turkish lira got a nice bounce from the news, rallying more than 3.5%.
There have been concerns about Erdogan’s leadership style, as he has curtailed human and press freedoms in recent years:
Although ostensibly democratic, Turkey is a de facto authoritarian regime, and one that increasingly supports systems of clientelism and patronage. The intimidation and arrest of journalists—as well as regular citizens who dare criticize the omnipotent president Recep Tayyip Erdogan—has now become common. Under this unprecedented pressure, Turkey’s few remaining domestic analysts and independent observers no longer question whether Turkey is an oppressive regime; now we debate the nature of its authoritarianism.
Investors, however, seem unreservedly happy with the outcome of the vote: a clear victory for the AKP marks an end to a period of political instability. “The markets have, perhaps unsurprisingly, reacted positively to a result which has reduced the political uncertainty that had clouded Turkey’s near-term outlook,” research firm Capital Economics wrote in a note to clients. “With the AK party able to form a government on its own, investors no longer need to await the outcome of another, potentially messy, round of coalition negotiations.”
Over the longer term, the currency was down nearly 24% against the dollar for the year in September, with some improvement from those record lows. Turkey has been known as one of the world’s “fragile five” emerging market economies whose foreign investment flows are exposed to damage from higher US interest rates.
And though certainty is nice, it doesn’t mean much if it’s just more of the same. The World Bank recently upgraded its Turkish economic growth forecast for the year, but it said economic growth won’t be able to keep up its improving pace without the structural reforms (paywall) that outsiders have been clamoring for since before the election.