From peddler to president, 20 years in power, the political strongman who is almost old is re-elected! Turkey's election dust settles, capital markets cast a ruthless "no" vote

News from the financial sector on May 29 On May 28, the hanging heart of the global political arena finally landed.

On the evening of May 28, local time, Turkish President Recep Tayyip Erdogan, who is nearly 70 years old, walked out of his residence in Istanbul Uskudar and announced that he had won the general election and extended his presidential term to 2028.

But "political strongman" Erdogan won quite dangerously this time, stumbling throughout the election process, and it was not until the play-offs in the second round that the winner was divided.

In this Turkish election, six anti-Erdogan parties formed an unprecedented unified coalition, even ahead of Erdogan in poll forecasts. In the first round of voting, Erdogan received 49.5% of the vote, and rival Kemal Kolızidaoğlu received 44.9%, neither side had more than half of the vote. In the second round of voting, according to preliminary official results released by Turkey's Supreme Election Council, Erdogan won 52.14% of the vote, and the opposition camp "National Alliance" candidate Klıchdar Oğlu received 47.86% of the vote.

So far, Erdogan, who came from the grassroots, has been at the helm of Turkey for 20 years. He not only surpassed the 15-year presidency of Atatürk, the founder of the Republic of Turkey, but also became one of the most important leaders of Turkey since its founding.

01From petty trader to president, 20 years in power

Erdogan was born into a Muslim family in 1954 and his father worked for the Turkish Coast Guard.

Erdogan's poor family conditions taught him how to survive early: as a teenager, in order to earn more living expenses, he worked as a small trader, wearing white cartoon uniforms on the streets and selling lemonade and sesame bread on red tricycles; Growing up, he went to Marmara University in Istanbul where he earned a degree in management.

In the 70s and 80s, Erdogan first got involved in politics and joined the Welfare Party in 1981.

In 1994, Erdogan really began to make his mark in politics. That year, he ran in the mayoral election of Istanbul, and at the age of 40, he was elected as a "dark horse" with 25.19% of the popular vote. During his tenure, he tackled many of Istanbul's long-standing problems, including water scarcity, pollution, and traffic chaos.

In 1998, the Welfare Party was outlawed, and Erdogan, along with other members, moved to the newly formed Virtue Party as chairman of the Istanbul Party. In April 1999, Erdogan was deprived of his political rights for five years in prison and could not run for the loya jirga. Three years later, the US-German Party was also banned, and Erdogan led the relatively moderate new wing of the former US-German Party, which founded and chaired the current Justice and Development Party.

Erdogan became prime minister in 2003 and was re-elected in July 2007 and June 2011. In August 2014, Erdogan was elected President of Turkey and was successfully re-elected in June 2018.

02 days, geographical blessing Turkey is not what it used to be

The unique geographical location across the Eurasian continent guards the main land transportation routes of the Black Sea. Turkey, which itself is blessed with "geographical advantage", has caught up with the Russian-Ukrainian conflict, the increase in the membership of the European Union and the unprecedented unity of the Arab world, Turkey is no longer the "Turkey" of the past, and no one dares to ignore the existence of Turkey and Erdogan.

Although the Ottoman Turkish Empire that spanned Asia, Europe and Africa is a thing of the past, Turkey today is still a geopolitical power with a population of 85 million, the second largest NATO army, nearly 4 million refugees, and even 50 nuclear warheads on US military bases.

Not only that, whether Sweden can join the alliance, whether the EU will face the next round of refugee crisis, whether Ukraine's grain can be shipped to the rest of the world through black shipping, etc., Erdogan has a great say in these complex international issues that require multi-party games, and can even be said to be a veto.

Especially after the Russian-Ukrainian conflict, Erdogan's influence has been further strengthened. He led Turkey to a special middle ground while maintaining exchanges with Russia and Ukraine. This makes it necessary for the United States and the European Union to use Turkey to carry out side-knocking to prevent the further expansion of the Russian-Ukrainian conflict.

How important Turkey's international standing is today can be seen in Erdogan's congratulatory message after his victory.

When he announced his victory on May 28, Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky sent congratulatory messages at the first time, and US President Biden and other leaders of EU powers also congratulated one after another.

"The victory in the elections is a natural consequence of your selfless work as a Turkish leader, which is clear proof that the Turkish people support your efforts to strengthen national sovereignty and pursue an independent foreign policy," Putin said. Zelensky claimed on social media, "We look forward to further strengthening the strategic partnership and strengthening cooperation for the benefit of the two countries and also for the security and stability of Europe." "I look forward to [you] continuing to work together as a NATO ally on bilateral issues and shared global challenges." ”

03Erdogan faces complex economic challenges

While Erdogan has successfully rebounded political challenges, he will still face complex economic challenges in the rest of his term.

In Erdogan's first 10 years in power, Turkey has indeed achieved tremendous economic growth, lifting millions out of poverty. But the weakness of "Erdogannomics" has also been exposed: lowering the savings rate, expanding consumption, and raising the investment rate will inevitably lead to consumption and investment exceeding national savings, which will eventually manifest itself as fiscal deficits and current-account deficits. Since 2018, the country's currency has lost 80% of its value against the US dollar.

Turkey's inflation rate reached 85.5% in 2022, and its exchange rate against the US dollar has plummeted by 76.7% in the past five years, and the economy has repeatedly hovered on the brink of collapse. More worryingly, the central bank's net foreign exchange reserves have fallen into negative territory due to long-term intervention in the foreign exchange market. Official data on May 19 showed that the net foreign exchange reserves of the Central Bank of Turkey are currently -$151.3 million.

In addition, there is a little crazier in "Erdogannomics". When the economy is growing rapidly, central banks often use interest rate hikes to cool the economy, and while traditional economies usually demand higher rates to fight inflation, Erdogan insists on doing the opposite. He has his own theory of the economy, arguing that when interest rates are lower, inflation will be lower, in stark contrast to the United States, which has been raising interest rates like crazy in order to curb inflation for nearly a year. For this, Erdogan also fired three central bankers in a row.

In the eyes of international capital, Erdogan's insistence on a low-interest rate monetary policy has made Turkey even worse, and the capital community clearly "hopes" that Erdogan loses. After Erdogan's victory, he experienced the ruthlessness of capital. During today's session, the Turkish lira fell below 20.06 against the dollar, a record low.

04The Turkish economy is not without turnaround

Despite the many questions ahead, Erdogan does not appear to be planning to make adjustments to economic policy, according to an interview he made before Sunday's runoff. Erdogan said his economic policies had yielded positive results. More likely, he will continue to build on his unconventional economic policies.

JPMorgan Chase & Co. analyzed before the election that if there is no significant shift in Turkey's economic policy, then the exchange rate of USD/LIRA will rise above 30.

However, the Turkish economy has not turned around without turnaround. This is followed by a strong tourist season, which will increase the central bank's foreign exchange reserves in the short term. In addition, some Gulf countries and Russia, which have good relations with Turkey, are also expected to inject funds into Turkey.

In March, the Saudi Development Fund said it would deposit $5 billion with Turkey's central bank to support Turkey's plans to strengthen its economy. In 2021, the UAE also announced the establishment of a US$10 billion strategic fund to support the investment of the country's companies in Turkey.

This article originated from the financial world