Tim Ash:  The morning  after in Turkey

Looks like a staggering win for Erdogan – 49/45.

The polls were totally and utterly wrong.

I don’t think this was election rigging. It’s because:

  • the turnout was huge, 93.6%, and the AKP got all their support out.
  • The opposition candidate was just poor. Kilicdaroglu has lost a string of elections against Erdogan. He is an Alevi, a Turkish version of the Shiite faith, and in a majority Sunni country that just does not work.
  • Erdogan is just a great campaigner. He has magic dust at these times. And he just gets Turks – the nationalist, socially conservative and Muslim ones. Many seculer Turks just don’t understand the country in which they live which is socially conservative, religious and nationalist.

  1. I have an 80% chance now that Erdogan wins in the second round.
  2. I anticipate a crisis in relations with the West soon after the election over Sweden’s NATO bid. Sanctions are threatened. Erdogan backs down. Sweden joins NATO at the June summit.
  3. Markets take an Erdogan win badly. Credit spreads go to new wides. The lira is overvalued and it has to adjust weaker. The CBRT only has enough reserves to hold the nominal rate fixed thru elections. Afterwards it has to let the lira go. Erdogan will not hike policy rates in defence of the lira. So that means either let the lira continue weakening, or call a friend (Putin or Gulf) to get new $$ to defend the currency or impose capital controls. Putin will want to keep Erdogan dependent so won’t give Erdogan enough cash. Gulf guys will demand policy orthodoxy as price for cash (as with Egypt), so it means IMF, higher rates, weaker currency.

He won’t do that. So this means Erdogan will do what he has over the past ten years which is let the currency weaken, selectively use capital controls and macro prudential and suck up higher inflation by trying to regulate markets and price increases. It means a sub-optimal scenario on growth and higher inflation sustained over the longer term.


  1. Turkey faces perennial BOP crises, only question when this becomes systemic.


These are the personal opinions of the author, printed with his permission


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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.