After Turkey election win, what problems does Erdogan face next?

Following his third presidential victory, Recep Tayyip Erdogan will sit down at his desk to tackle a host of immediate issues facing Turkey.

Foremost in the president’s in-tray will be the economy and how to tackle the country’s ongoing financial crises.Erdogan successfully took the focus away from a cost-of-living crisis during the election campaign – making significant hikes to pensions and salaries, providing discounts to household energy bills, all while moving the debate to issues such as security and family values.

But the Turkish economy is in bad shape, and in his victory speech on Sunday night, Erdogan highlighted inflation as the primary problem facing the country.

“Resolving the problems caused by the price increases and by inflation is the most urgent topic of the coming days,” he told supporters outside the presidential palace in Ankara.

“Solving them is not difficult for us. Weren’t we the ones who proved this during my time as prime minister?” Erdogan added, referring to his 11-year spell as premier before he became president in 2014.

The lira hit a record low on Monday morning of 20.06 to the United States dollar, having lost almost 80 percent of its value over the last five years.

Many economists blame this largely on Erdogan’s unorthodox policy of lowering interest rates, which have been nearly halved since the end of 2021, as a means of fighting inflation.

Timothy Ash, a Turkey expert at London’s BlueBay Asset Management, said the currency’s current level was “just not sustainable”.

He added that the central bank “has been blowing through reserves to keep the lira relatively stable in the run-up to the election to ensure an Erdogan win … With limited FX reserves and massively negative real interest rates the pressure on the lira is heavy”.

But Emre Peker, Europe director at the Eurasia Group, said Erdogan is likely to see Sunday’s victory as an endorsement of his economic policies, which the president argues will make Turkey’s economy stronger in the long run.

“Despite the highest inflation we’ve seen in years, despite significant pressure on the lira, despite high unemployment and people’s concerns, [in] winning the election he will feel quite vindicated,” Peker said.Foreign inflow
Peker added that Erdogan was motivated by a “desire to wean Turkey off its overall economic dependency on Western partners”.

Turkey has been helped in recent months by money from Russia and Gulf countries. Qatar, Saudi Arabia and the United Arab Emirates have deposited billions of dollars with the Turkish central bank or set up multibillion-dollar investment funds.