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Turkish President Tayyip Erdogan waves as he addresses his supporters in Ankara following his victory in the second round of the presidential election.
Erdogan wins reelection — what's next for Turkey?
Turkey's President Recep Tayyip Erdogan won Sunday's presidential runoff election, beating opposition leader Kemal Kilicdaroglu by a not-too-shabby 4 percentage points in a deeply polarized country. It’s a big victory for Erdogan, who ahead of the first round many thought would finally lose — yet eventually defying the polls to advance, win another term, and enter his third decade in power.
For the next five years, Erdogan will be "politically unencumbered" as his party also won a majority in parliament, Eurasia Group senior analyst Emre Peker explains in this Twitter thread. That will likely mean the Turkish leader will double down on some of his most divisive policies to please his base, including what to do with Syrian refugees.
Things are not looking good for the economy. The lira crashed after Erdogan's runoff victory, as investors fear the president will try to get the country out of its economic crisis with more of his unorthodox policies known as Erdonomics. The same goes for the state of Turkish democracy, while on foreign policy expect Erdogan to continue his delicate balancing act between the West and, well, the enemies of the West.
In Peker's words: "Quite an explosive mix — politically for Erdogan, and personally for all Turkey."
The Graphic Truth: Erdonomics vs. Turkish economy
This week, Turkey’s annual inflation rate reached 83.45%, a 24-year high. And that's just the official number — independent experts believe the actual figure is more than 186%, which means prices have almost tripled.
Yet President Recep Tayyip Erdoğan doesn't seem to be bothered by sky-high inflation, insisting he has the magic formula for Turkey's economy to grow out of the problem: continue to defy economic orthodoxy by keeping interest rates low. Now they’re at 12%, but if you factor in inflation, the real rate is minus 68%, which means that cash is burning a hole in the wallets of Turkish banks.
Erdonomics is all about putting growth above stability. If Turkey makes it easier to borrow money to invest, do business, and create jobs, GDP will expand at a faster rate than prices are rising.
To be fair, Turkey's economy is indeed growing, to the tune of a robust 7.6% year-on-year in the second quarter of 2022. That’s 0.3 percentage points more than in the first three months of the year.
Is it growing enough? Nope, according to pretty much any economist not on the president's payroll. Erdoğan’s ultra-loose monetary policy, experts argue, is killing the economy.
Another big problem is that Erdonomics has made the local currency nosedive against the US dollar. The greenback is very strong this year, true, but Turks and foreign investors would rather save or spend dollars on imports and stock up on worthless liras. Turkey also has $182 billion worth of debt it needs to pay back by April 2023, putting even more pressure on the lira.
Still, Erdoğan won't let Erdonomics go because he has an election coming up. When Turks go to the polls next year, the president hopes that if the economy keeps growing and inflation somewhat tapers off, re-election is all but assured. But that's a big if — and a major gamble for Turkey's strongman leader.
(Also, here's a fun take on Erdonomics by ... Erdoğan himself.)This article comes to you from the Signal newsletter team of GZERO Media. Sign up today.
Turkish President Recep Tayyip Erdogan during a meeting with Russian President Vladimir Putin at the Bocharov Ruchei residence.
In Erdogan’s shoes: What is he thinking?
Recep Tayyip Erdogan has held power in Turkey for almost 20 years, first as prime minister, then as president. With inflation soaring and his currency collapsing, Erdogan’s eccentric ideas about economic policy seem to have made a bad situation worse — but what if we saw things from his perspective? We steal a memo on Erdonomics from deep inside the Turkish Presidential Palace.
From: the Desk of His Excellency, Recep Tayyip Erdogan, President of Turkey
My Dear Turks,
I write this with a heavy heart, but a very fine pen.
We have seen large scale public borrowing, a currency crash, runaway inflation, and resignations from the Central Bank because its leaders wanted to lower interest rates.
No, my friends, I am not talking about the past few months, a scene painted by biased Western media, which even doubts that I got a college degree (of course I did, though nobody seems to believe me, but I digress).
Rather, I am referring to the dark days of 1994, when you voted for me as mayor of Istanbul.
The financial crisis which we were experiencing then had crippled us. I drew you out of that mess by throwing everything I could at beautifying Istanbul. I brought you green buses, I built you recycling plants. I even gave you my email address in order to let you have a direct role in governance. Surely, my experiment changed Istanbul, the City of Centuries. Thus, I decided to rule for centuries.
But not without challenges. When you voted me in as prime minister in a 2002 landslide, we were crippled by another financial crisis, thanks to the ineptitude of those I had replaced: the lira was totally out of control, confidence in the economy was so low that almost two-thirds of bank accounts were held in foreign currencies, and allegations of corruption against the former leadership had weakened our great nation. Of course, no such aspersions — whether about corruption, mismanagement or desperate dollarization — can be cast against my current government. I repeat, none!
Let’s travel back to those early days. When I took over, things changed immediately. We bounced back, like the great Ottomans did after their mediocre European campaigns (unfortunately, our own recent European campaigns have been thwarted by continental arrogance and conspiracy). But back to that golden era during my first term: under my watch GDP almost tripled in just four years, foreign direct investment boomed, and unemployment and inflation dropped to record lows.
My dear friends, you didn’t appreciate what a good thing you had going for you.
You were thankless. You protested against progress. So, I pushed back. And when your Western backers didn’t take a hint, and attempted an extra-constitutional coup, I fought back with a constitutional one that made things right, and put me properly in charge.
Now, you and your friends are at it again, doubting my plans for our economic revival.
My dear Turks, as I said at parliament recently, both the Quran and I can assure you: with lower interest rates come fewer worries — and more borrowing and spending! If we shed the evil of usury, you will be self-sufficient and produce more exports. Growth will follow, Inshallah!
I want to put your money where my mouth is: in my personal resolve to cut interest rates, I have even kept every scissor I have ever used on display. After all, my economics are built on family and friends, on liberating our workers, and fighting a war of economic independence.
Trust me, brothers and sisters. My plan, based on theories by economists old and new, now depends on you. I will guarantee a return on your deposits, but only if your deposits are in liras. Things are already in motion for your benefit: price hikes have been offset by an increase in your wages. Foreigners are returning, the lira is already bouncing back, even though I had to sell billions of dollars to intervene.
And what’s a little lira weakness if it helps us to export to the world the wonderful things we make, eh? Wouldn’t our African brothers, also victims of Western predators, be safer with more of our armed drones? Remember, my friends: we are in the midst of the Learned Helplessness Syndrome. The independence of the Central Bank is overrated, and not necessary for those who love their country! Orthodoxy is slavery! We will break these shackles! Cok yaşa Türkiye!
And do not forget, there is such a thing asTurkish exceptionalism. It was Turks who invented the COVID vaccine (even though they were in Germany). It is the Turks who are doing the most to stop Russia from invading Ukraine. It is the Turks who will help stabilize our brothers in Africa. Even Elon Musk — not a Turk but still a nice man who considered it an honor to meet me — has promised to enhance our search for the stars, by putting our satellite into space.
We are a great nation, my friends. We’ve seen these bread lines before. But these Western reports about hunger and desperation are getting old. I am convinced that, after I stop a run on the banks, when all of this is over, we will be a breakout star. I urge you: don’t believe the naysayers. Borrow freely, spend abundantly, enjoy life and don’t forget to vote in 2023!