Commentary, Economy

Post-elections: back to the ‘Virtuous Circle’

In the post-election period, Turkey has already entered a new era of high economic growth and robust political stability, thus restoring its decade-long virtuous circle.

The March 30 municipal elections will be recorded in Turkish political history as an exceptional episode since the electoral contest that was supposed to occur among local actors was turned into a referendum for the Justice and Development Party (AK Party) government and its charismatic leader, Recep Tayyip Erdoğan. We have witnessed probably the most tensely contested municipal election campaign in Republican history in which both the prime minister and opposition leaders placed all of their political capital and credibility on the line. Moreover, the whole saga was surrounded by a murky process of disinformation based on illegal and manipulated recordings of public officials and unconfirmed allegations of corruption.

Therefore, the socio-political conditions leading to these elections were extraordinary, unexpected and open to surprises that created serious economic costs in the form of rising interest and exchange rates and higher country risk perceptions.

Therefore, the fact that the AK Party managed to gather around 45 percent of the votes (which transcends the total of the two main opposition parties) and broke its record in municipal elections at the end of a stressful campaign points to a comprehensive societal settlement.

It is now safe to conclude that the configuration of political forces in Turkey has crystallized at least for the medium term, and domestic/international claims for “systemic failure” proved futile. Heading to the presidential elections in August, there is widespread consensus that Tayyip Erdoğan could run for the presidency and comfortably become the first popularly elected president in the country’s history. It is also pretty likely that the forthcoming general elections early next year will reconfirm the widespread popularity of the incumbent government across Anatolia.

The message of continued political and economic stability emerged as the main outcome of these elections as received by international investors and reflected in the rally in the Istanbul stock exchange, the rising value of the Turkish lira and declining interest rates.

Concerning Turkey’s domestic dynamics, as we have left the usual political wrangling, backbiting and crisis mongering that characterize most electoral seasons behind, it is time to go back to business as usual. In the context of the “New Turkey,” this refers to a virtuous circle in which long-term expectations of political stability feed into domestic and international investment decisions and resulting economic growth; likewise, the positive economic prospects of the country ensure the maintenance of political support for the incumbent government.

The sensitive interlude between Dec. 17 and the March 30 elections, marred with judicial operations, political manipulation attempts and initiatives to distort public perceptions, became just another test to prove that Turkey’s political and economic fundamentals are resilient and can withstand shocks.

In the post-election period, Turkey has already entered a new era of high economic growth and robust political stability, thus restoring its decade-long virtuous circle. Initial signals of the economic take off, which started to come even before the official announcements of election results, are quite promising in this respect. The news coming from Gulfbased investors for a potential $20 billion investment in the energy sector, ongoing projects for nuclear reactors and rising export performance demonstrate that the economy would do well in 2014, leading to a speedy improvement in the current account balance. Following more than a decade in power, the ruling AK Party certainly needs some inner rejuvenation, but the electorate indicated that they expect intra-party reform from the prime minister they trust, rather than through suspicious anti-democratic endeavors. The moral of the story so far is those who believe in the “new Turkey” and make longterm investments in its “new economy” are likely to emerge advantageous.

Resource: Daily Sabah, April 05, 2014


Sadik Unay completed his B.A. in Politics and International Relations at Bogazici University. He continued with his M.A. and Ph.D. studies at Manchester University. He is currently a faculty member at Istanbul University, Economics department.