What awaits Erdogan, Turkish lira, in his new term?

Turkish lira falls to 20.05 against dollar as Erdogan claims victory
What awaits Erdogan, Turkish lira, in his new term?
Turkish President Recep Tayyip Erdogan

Turkish President Recep Tayyip Erdogan won a run-off in  Turkiye’s presidential election to secure another five-year term, according to official preliminary results that put an end to the opposition’s determined efforts to oust the longtime leader of his country.

Near-final results showed him beating secular rival Kemal Kilicdaroglu by four percentage points.

The head of Turkiye’s High Election Commission, Ahmet Yener, said on Sunday evening that Erdogan had won 52.14 percent after 99.43 percent of the votes were counted.

He added that Erdogan’s rival, Kilicdaroglu, received 47.86 percent of the vote.

Kilicdaroglu won 44.9 percent of the vote in the first round to Erdogan’s 49.5 percent, reflecting the president’s strong support despite a worsening cost-of-living crisis and pre-election opinion polls showing Kilicdaroglu ahead.

Celebrations spread across Turkiye as congratulations from world leaders followed, with Erdogan delivering a first speech from the roof of a bus in Istanbul.

Speaking to a crowd of supporters outside his residence in the city, he said: “Our nation has entrusted us with the responsibility of governing the country for the next five years.”

Erdogan, who has ruled Turkiye for twenty years, added: “We will fulfill all the promises we have made to the people,” stressing that “every election process is a renaissance.”

“These elections have shown that no one can attack the gains  made by this nation,” he said, adding: “We hopefully deserve your trust.”

In a second speech from the presidential palace in Ankara to hundreds of thousands of supporters, Erdogan called on Turks to “unite in solidarity”.

Recep Tayyip Erdogan enjoys broad support among the poorest and most rural segments of Turkish society because of his promotion of religious freedom and the modernization of once-crumbling cities.

Kilicdaroglu formed a strong alliance that brought together former Erdogan allies and secular and conservative nationalists.

On May 14, he succeeded in reaching the second round for the first time in the history of  Turkiye’s presidential elections.

Read: Turkiye’s foreign reserves saw $17 bn dip ahead of election

But Kilicdaroglu did not formally concede defeat while delivering a brief statement to reporters in Ankara.

“I am very sad in the face of the difficulties that lie ahead of the country,” he said.

The vote came amid  Turkiye’s worst economic crisis in two decades and after devastating earthquakes in the east of the country in February.

The Turkish lira fell to 20.05 against the dollar as Erdogan declared victory.  That figure is very close to a record low of 20.06 hit by the lira against the greenback on Friday.

The lira’s daily movements have become abnormally small and mostly heading in one direction: decline.

Exporters are now forced to sell 40 percent of foreign exchange earnings to the central bank, while the plan to protect bank deposits against exchange rate fluctuations, which helped quell the turmoil of 2021, remains a crucial but potentially expensive defensive wall.

What awaits  Turkiye after the election is decided?

The deteriorating economic situation is one of the most important domestic challenges that  Turkiye’s next president must deal with quickly.

The Turkish economy is at a critical stage, with the inflation rate officially reaching about 44 percent, but many are skeptical of this rate and say the rate is much higher.

Food prices rose 54 percent year-on-year in April, with inflation finally falling after peaking in October at 85.5 percent, the highest level under Erdogan.

Annual inflation has remained above 10 percent for almost five years since the 2018 election. However, it began to rise sharply after the currency crisis in late 2021, which, according to analysts, was caused by a series of interest rate cuts as part of Erdogan’s unconventional economic policy.

Erdogan’s early years were a model of strong economic growth and massive construction projects, and Turkiye has always adhered to the terms of loan agreements with the International Monetary Fund.

However, the Turkish lira lost 44 percent of its value in 2021 and 30 percent in 2022, due to Erdogan’s monetary policies, the Ukraine war, and differences with Washington.

In an effort to attract voters amid the dire economic situation, especially young people, Erdogan promised to create six million jobs, achieve high growth rates, and give a big boost to tourism.

Erdogan, who has tripled the minimum wage in a year, has made more generous campaign promises, including scholarships for students who have lost relatives in the quake.

In return, Kilicdaroglu vowed to return to traditional economic policies and move away from Erdogan’s policies in the event he won.

With regard to external challenges, the Syrian refugee issue is one of the most prominent external challenges that come at the top of the priorities of the next Turkish president, and among the three main issues of concern to the Turkish voter.

According to UNHCR, some 3.7 million Syrian refugees who came to the country after the outbreak of the Syrian conflict in 2011 live in  Turkiye.

Analysts now hope that Erdogan, who secured victory on Sunday, will deliver on his campaign promises to boost incomes and rebuild the country after the February quake.

Some investors worry that if the market recovers again, authorities could resort to more stringent capital controls, something the government has repeatedly said it is not considering as it seeks to close the $230 billion external financing gap or 25 percent of the country’s gross domestic product.

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