Moscow, May 12 – The electoral victory in Turkey of the Justice and Development Party (AK Parti) of the incumbent President Recep Erdogan will mean the continuation of the current economic policy: further easing of rates, despite the high inflation in the country, which will support the industry, but will lead to a significant weakening of the lira in the short term. These conclusions are contained in the Roscongress report “Turkish Economy: Anticipating the Magnificent Century”, which is available to the News Agency.
The authors of the report believe that if Kemal Kilicdaroglu’s Republican People’s Party wins a majority of votes, Turkey will expect changes: higher rates, lower lending and demand, which will eventually lead to stagnation in the economy.
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Parliamentary elections and the first round of presidential elections will be held in Turkey on May 14. If none of the candidates receives more than 50% of the vote, the second round will be held on May 28.
“The elections could lead to a change in monetary policy and foreign trade if the opposition wins,” the report says. But regardless of the outcome of the elections, the authorities will have to solve a number of problems in the economy: high inflation, a weak lira exchange rate, and an imbalance in foreign trade.
“The prospects for pivot gas projects and new units of the Akkuyu Nuclear Power Plant also depend on the election results,” experts say.
From two evils
The authors of the report analyzed the economic programs of the two parties and identified their main risks.
Erdoğan’s economic program calls for further interest rate cuts in the economy to stimulate the construction sector and facilitate investment in manufacturing through cheap loans.
In addition, maintaining low interest rates makes businesses and households more economically vulnerable, and double-digit inflation seriously reduces the purchasing power of citizens.
“A victory for the opposition carries the following risks: a sharp increase in the key interest rate to 40% and a decrease in new lending. A decrease in the overall level of demand in the economy will lead to a recession,” the report states.
Experts predict that the abolition of the system of deposits with currency risk insurance will lead to an increase in the share of deposits in euros and dollars. In addition, part of the money from deposits will go to the real estate market and inflate the bubble there. And in the event of a review of contracts with Russian companies, Turkey’s foreign trade deficit will increase.
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