The Economy Finally Doomed Erdogan in Major Defeat in Turkish Local Elections. What Comes Next?

Turkish President Recep Tayyip Erdoğan has been in power since 2003, when he assumed the post of prime minister. He was elected president in 2014 and re-elected twice since, most recently last year.

Throughout that time he has used identity issues to his advantage, but cracks in this strategy were evident before last year’s national elections. He managed to patch over them largely due to a feckless opposition campaign, but they were fully exposed in the country’s March 31 local elections. The problem is those identity issues work well when the economy is humming along – not so much during a cost-of-living crisis. The growing economy was always likely the biggest part of Erdogan’s appeal while the identity issues helped on the edges. But in the March 31 local elections both came undone.

Erdogan wasn’t on the ballot, but his ruling Justice and Development (AK) Party lost the popular vote for the first time since 2002 – largely due his backers’ disillusionment with the ongoing economic downturn and the government response to Israel’s war in Gaza. The drop in turnout from the 2019 local elections hit Erdogan’s AKP party the hardest:

So what is the economic situation that dampened enthusiasm among Erdogan voters?

Despite the Turkish economy growing by 4.5 percent last year, many are struggling to pay for food, utilities and rent as inflation continues to hover around 70 percent.

Inflation has been a problem around much of the world since the pandemic began and was worsened by the war in Ukraine. While most central banks raised interest rates in response, Erdogan pushed for an interest rate cutting spree.  Inflation went through the roof as a result and continues to stick around 70 percent, making it some of the worst in the world.

The government continued to pursue an expansionary fiscal policy ahead of last year’s presidential election in order to help Erdogan get across the finish line, but has since enacted a tight monetary policy. On March 21, Türkiye’s central bank raised interest rates to 50 percent.

What had been Erdogan’s greatest strength for years – the economy – has now become his biggest weakness as he’s mostly blamed for forcing the nominally independent central bank to start slashing borrowing costs in 2021.

The fall of the Turkish lira continues to place major strain on the economy in three primary ways. From Gulcin Ozkan, a professor of finance at King’s College:

First, a significant part of Türkiye’s imports are inputs used in the production process, particularly of vehicles, machinery and mechanical appliances that make up nearly half of the country’s exports. Any fall in the value of the lira will push up input costs and hence prices, reducing the competitiveness of the country’s exports.

Second, Türkiye imports a substantial part of its energy from abroad. In much the same way, any depreciation of the lira will make it more expensive to import energy.

Third, Türkiye is sitting on substantial external liabilities in foreign currency terms. This makes the depreciation of the lira even more costly. Any loss in its value magnifies the amount of resources required to repay a given level of foreign currency liabilities.

Erdogan’s ruling alliance was punished at the polls as a result. Here were the biggest winners from the elections:

The New Welfare Party

The attempt by Erdogan to use the war in Gaza to distract from economic woes failed. He has tried to present himself as a leader of the Muslim world with more harsh rhetoric towards Israel, but voters noticed that was all it was: rhetoric. Oil still flows from Azerbaijan to Israel via Turkiye, and the Incirlik air base in Turkiye is still used by the US to deliver weapons to Israel, and the Türkiye Wealth Fund recently shipped 21 tons of boron to Fertilizers & Chemicals Ltd, a large Israeli chemical company known for supplying the Israeli military.

Some members of the government defend Türkiye’s ongoing trade with Israel, saying that any attempt to stop it would upset the markets and hurt Türkiye more than Israel. The AKP was hurt as a result.

The Islamist far-right New Welfare Party (YRP)took a hardline stance against Israel over the war in Gaza and became the third largest party nationwide with 6.19 percent of the vote and won 60 municipalities.

The party left Erdogan’s ruling People’s Alliance and campaigned on ending trade with Israel and increasing the lowest pension to 20,000 liras ($625).

The Republican People’s Party 

The biggest winner, however, was the main opposition, the Republican People’s Party (CHP), which is now the largest in the country, controlling 36 of the country’s 81 provinces – almost double what it had before the election.

Most worrying for Erdogan is how the CHP expanded its reach into conservative strongholds. The CHP successfully made the election a referendum on the economy and won as a result.

The incumbent Istanbul Mayor Ekrem Imamoglu was reelected despite major efforts over the years to halt his rise (Imamoğlu has been embroiled in a lawfare case for the past two years for allegedly insulting the judges in the Supreme Election Council for their decision of canceling the mayoral election results in 2019).

He is now seen as the opposition’s best bet at winning back the presidency from Erdoğan’s AKP in 2028. Many thought he should’ve been the candidate in last year’s presidential election.

Should he run, he likely won’t be facing Erdogan, as more changes to the Turkish constitution that would allow him to run again and remain as president past 2028 are now unlikely. Even before the defeat, Erdogan had suggested that the 2023 election that saw him re-elected president with 52 percent of the vote would be his last. That looks much more likely now. And Imamoglu appears to be the clear frontrunner for the presidency.

Imamoglu talks a lot about “restoring democracy” and “change.” In practice that’s mostly about lessening the amount of power wielded by the president’s office, which has increased considerably under Erdogan. Beyond that, Imamoglu is credited with being charismatic. Selim Sazak, the head of Sanda Global, an Ankara-based consultancy that advised several campaigns during the local elections, told the Guardian that Imamoğlu’s political brand is a blend of charisma and his Black Sea roots as “Bill Clinton from Trabzon … without the infidelity.”

Less favorable views of Imamoglu point out that he has accomplished little despite big promises in Istanbul. Turkish journalist Ismail Yasha writes at Middle East Monitor:

Imamoglu is also backed by the Istanbul bourgeoisie, Western media and European embassies. Moreover, some voters who themselves or whose parents moved from the Black Sea regions to Istanbul may vote for him based on regional affiliations, as Imamoglu was born in the Trabzon province. In addition, there is a percentage of voters who are expected to vote for him simply to spite the AK Party, due to their frustration with the performance and decisions of the Turkish government run by the party led by President Recep Tayyip Erdogan.

There have been a lot of premature declarations that this marks the beginning of the end of Erdogan and the AKP. While Imamoglu and the CHP won on the back of a mismanaged economy, Erdogan missteps, and ruling coalition infighting, there are reasons to temper expectations.

Erdogan’s coalition still runs the national government, and unless early elections are called, 2028 is a long ways away. In a national election foreign policy plays a large role, which benefitted Erdogan last year.

The CHP must still square the circle between their westward gaze and the Turkish public which is increasingly turning its back on the West.

It’s entirely possible, if not likely, that Erdogan would have lost last year’s presidential election had the opposition campaign not been so feckless. The economy was already in tatters, but the election became just as much about foreign relations and Türkiye’s place in the New Cold War as the cost of living crisis.

CHP candidate Kemal Kılıçdaroğlu represented closer ties with the West. He paid visits to the US, UK, and said Western money would pour into Turkiye should he win – a claim backed by western financial institutions. According to Bloomberg, “Vanguard Says Erdogan Loss Would Make Türkiye Bonds Loved Again.”

Despite not presenting any evidence, Kilicdaroglu alleged Russian interference in the campaign. Not only did this distract from the opposition’s winning issue (the economy) but it was problematic because Turks by and large are no longer looking West.

They resent being strung along for years and looked down on by the EU. They don’t trust the US – at all. A December poll by the Turkish company Gezici found that 72.8 percent of Turkish citizens polled were in favor of good relations with Russia. Compare that to the nearly 90 percent who think the US is a hostile country. The millions of Russian tourists showing up since Western sanctions and helping to keep the economy afloat in the last few years surely doesn’t hurt. Erdogan was able to paint Kilicdaroglu as a Western stooge, and is now in office until 2028 while Kilicdaroglu was retired.

Despite being a more nimble politician, should Imamoglu be the CHP candidate in the next national elections, he could face the same pitfalls that Kilicdaroglu did.

For one, if the CHP aligns with Kurdish parties in order to attract more votes, they open themselves up to attacks from the right as happened last year.

The pro-Kurdish Peoples’ Equality and Democracy Party’s (DEM Party) decision to field its own candidates in the recent local elections and refrain from forming an alliance with the CHP. This move prevented Erdogan’s party and others in the governing alliance from being able to effectively recite the usual refrain that the CHP supports terrorism.

But just as important will be the CHP’s vision for Türkiye in the New Cold War where it has become a crucial third country to bypass sanctions, and its geographical position guarding entrance to the Black Sea makes cooperative ties coveted by both sides. Erdogan is a master at playing both, gaining concessions from both the West and Russia, and hyping his version of Turkish nationalism while the more secular and bourgeoisie CHP can’t seem to help itself from looking longingly to the West.

In last year’s election, the opposition alliance included in its platform items that were clearly designed to move Türkiye into the Western camp. The bloc’s “memorandum of understanding on common policies” stated it would “reduce the risk of dependence on certain countries/companies in natural gas imports,” which sounds eerily similar to the EU’s ill-fated plan with Russia. Türkiye receives nearly half of its natural gas from Russia and a quarter of its oil.

The opposition alliance also pledges to “take initiatives” in order to make it possible for Türkiye to be reaccepted to the F-35 fighter jet program. The memorandum does not expand on this, nor does it mention why the US expelled Türkiye from the program in the first place. The reason was that after years of ignored requests for the US Patriot system with technology transfer, Türkiye purchased the superior S-400 Russian system in 2017. Lastly, the Nation Alliance vowed to review the contract for the Akkuyu Nuclear Power Plant, which Russia financed and built, helping Turkiye join the club of countries with nuclear energy.

To his credit, Imamoglu avoided wading into these New Cold War issues in the Istanbul election, but they will be waiting in any national contest and could prove problematic.

Two years ago, Imamoglu faced criticism for dining with former British Ambassador Dominic Chilcott while the city struggled with widespread disruption from a heavy snowstorm, which is reminiscent of  Kılıçdaroğlu meeting with US Ambassador to Turkiye Jeff Flake ahead of last year’s election, a move that was hammered by Erdogan.

And İmamoğlu has said that the EU is a part of Türkiye and Türkiye is a part of the EU during a meeting with the ambassadors of 27 countries from the bloc. Meanwhile, recent polling in Türkiye show that 75 percent think the EU is biased against Türkiye.

Nonetheless, Western think tanks are already licking their chops over ways to capitalize off of Erdogan’s setback. Here’s Carnegie Europe:

What remains uncertain is whether Türkiye’s policies will shift on two issues of critical importance. The first is the presence of Russian-made S-400 missile systems in Türkiye’s inventory—a disturbing choice for a NATO country.

I’m not sure that was on the ballot. Likewise, there has been a lot of celebration that Turks voted “in favour of an ethnically, culturally and ideologically inclusive national alliance for democracy and change,” but it’s more likely they voted (or chose not to vote) based on their pocketbooks.

What’s Erdogan do from here? He pledged to continue with an economic plan implemented last year to tackle Türkiye’s inflation. Berk Esen, a political scientist at Sabanci University in Istanbul, told Arab News:

“I don’t expect [Erdogan] to go for early elections, even if the opposition asks him to do so. He may try to stabilize Turkiye’s economy, but given how much the current economic policies have minimized the AKP’s base in this election, it is difficult to really see how much longer such policies can continue. And even if the economy is managed, the Turkish economy will not necessarily see the phenomenal growth rates we saw in the 2000s.”

And that’s a problem for Erdogan and the AKP as it could be a long climb for them to restore trust in their management of the economy:

Türkiye gets 1st rating upgrade in a decade on policy flip, but it needs to do more to achieve investment grade.

That means
-tight monetary policy
-less FX borrowing
-higher FX reserves
It will also need stamina — it took nine years to move from B+ to investment grade in 2012. pic.twitter.com/5u8NZcvW6I

— Selva Baziki (@SelvaBaziki) March 15, 2024