Erdogan bruised by unbeaten, while Turkey's growth outlook is dented

Europe's World

Asia & Emerging Economies

Picture of David Tonge
David Tonge

Managing Director of IBS Research & Consultancy

The world has had Ukraine and Syria. Turkey has had municipal elections – and few Turks will regret their passing. The run up to the vote on March 30 was one of the most corrosive periods in recent Turkish history – and the respite may be brief. In August of this year, a new President of the Republic is to be elected, and for the first time this is to be popular vote rather than an election by deputies or, earlier, senators. Then, by mid-2015, general elections are due.

For Prime Minister Recep Tayyip Erdogan, the elections have been a success. His party won 45% of the vote, up from 38% in 2009, and it retained control of two of Turkey’s three largest cities. But the divisions continue. If the recent tensions had been only a matter of mutually-abusive rhetoric, it would be less important. But the three months leading up to the March 30 voting saw the better qualities of the Turkish republic being set at naught. Parliamentary democracy is not just a matter of elections, it is also a system and a process which is intended to prevent abuses by an unbridled executive. And this requires an independent judiciary, freedom of expression – including a free press and free social media – and a strong legislature. It is faith in these which needs to be restored.

Alleged interference in government tenders, pressure on judges, pervasive financial dealings with businessmen, micro-control of television and newspaper owners, and reported consideration in Ankara of provoking war with Syria – the daily accusations have been profoundly disturbing

The battle between the Prime Minister Erdogan and the movement of Fethullah Gulen, the Philadelphia-based preacher, has been unedifying. The allegations of kleptocracy would have toppled any European politician. Alleged interference in government tenders, pressure on judges, pervasive financial dealings with businessmen, micro-control of television and newspaper owners, and reported consideration in Ankara of provoking war with Syria – the daily accusations have been profoundly disturbing. Not only for what is described, but for the way the information has been collected, which is mainly by the taping of almost all telephone calls made by Turkey’s most prominent citizens. Not, it seems, by the Turkish state but by supporters of the Gulen movement in positions of influence in the judiciary and police. The movement, once so close to Erdogan, is now, as he himself has been saying, a state within the state, that is without accountability.

Erdogan’s response has been to brazen it out, going on the stump to attack his attackers, and showing the same aggressive intolerance as characterised his response to the occupation of Gezi Park last summer. This played well with his loyalists. Allegations which would have ruined a less forceful person’s career have been brushed aside and his creation, the AK Party, has control of most key municipalities, with all the revenue possibilities attached.

All the same, Erdogan’s personal ratings have been dealt a blow. In December 2012, a survey by Metropoll found that 59.1% of Turks approved of him as Prime Minister, while 34.8% did not.  In February 2013, approval was down to 43.5%, with disapprovals up to 51%.

The country is more polarised than for a quarter of a century. Political uncertainty seems set to continue, even as his government hunkers down for a twelfth year in office

The country is more polarised than for a quarter of a century. Political uncertainty seems set to continue, even as his government hunkers down for a twelfth year in office. As for Erdogan himself, he has indicated he may well run for President in August:  “We are ready to devote ourselves to whatever mission we will be endowed with,” he said as the scale of his municipal victory became clear.

The markets have so far responded relatively mildly to the political tensions. Turkey has long been classed as among the countries most vulnerable to international capital movements, but it has come through the latest political turbulence relatively unscathed. Fund movements have been limited. The Istanbul Stock Exchange index has fallen 10% in Turkish lira terms (though 20% in US dollar terms). A belated hike in interest rates on January 28 has buttressed the Turkish Lira: this was only 9% lower in March than on December, when the IMF wrote that the Turkish lira was 10-20% overvalued. But protecting the Turkish Lira has cost the Central Bank 22% of its net foreign exchange reserves, so its armour is wearing thin.

Current expectations are for less growth this year than before the political crisis. In October 2013, the Turkish government was forecasting 4% growth and the IMF 3.5%.  In January 2014, the World Bank reduced its forecast from 4.5% seven months earlier to 3.5%. Now some local commentators are forecasting 2.5% growth this year.

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