After Turkey election win, what problems does Erdogan face next?

Economic concerns and relations with the West lie at the top of Erdogan’s agenda after presidential run-off victory.

Supporters of Turkish President Tayyip Erdogan carry a banner with his image
President Recep Tayyip Erdogan still retains solid support in Turkey, but will now have to contend with several challenges in his new term [Kemal Aslan/Reuters]

Istanbul, Turkey – Following his third presidential victory, Recep Tayyip Erdogan will sit down at his desk to tackle a host of immediate issues facing Turkey.

Foremost in the president’s in-tray will be the economy and how to tackle the country’s ongoing financial crises.

Erdogan successfully took the focus away from a cost-of-living crisis during the election campaign – making significant hikes to pensions and salaries, providing discounts to household energy bills, all while moving the debate to issues such as security and family values.

But the Turkish economy is in bad shape, and in his victory speech on Sunday night, Erdogan highlighted inflation as the primary problem facing the country.

“Resolving the problems caused by the price increases and by inflation is the most urgent topic of the coming days,” he told supporters outside the presidential palace in Ankara.

“Solving them is not difficult for us. Weren’t we the ones who proved this during my time as prime minister?” Erdogan added, referring to his 11-year spell as premier before he became president in 2014.

Inflation peaked at 85 percent late last year, dropping to 44 percent last month, although independent economists dispute the official figures and say it is at 105 percent.

Interest rate policy

The value of Turkey’s currency, which the government had protected through selling foreign currency reserves, is dropping.

The lira hit a record low on Monday morning of 20.06 to the United States dollar, having lost almost 80 percent of its value over the last five years.

Many economists blame this largely on Erdogan’s unorthodox policy of lowering interest rates, which have been nearly halved since the end of 2021, as a means of fighting inflation.

Timothy Ash, a Turkey expert at London’s BlueBay Asset Management, said the currency’s current level was “just not sustainable”.

He added that the central bank “has been blowing through reserves to keep the lira relatively stable in the run-up to the election to ensure an Erdogan win … With limited FX reserves and massively negative real interest rates the pressure on the lira is heavy”.

But Emre Peker, Europe director at the Eurasia Group, said Erdogan is likely to see Sunday’s victory as an endorsement of his economic policies, which the president argues will make Turkey’s economy stronger in the long run.

“Despite the highest inflation we’ve seen in years, despite significant pressure on the lira, despite high unemployment and people’s concerns, [in] winning the election he will feel quite vindicated,” Peker said.

Foreign inflow

Peker added that Erdogan was motivated by a “desire to wean Turkey off its overall economic dependency on Western partners”.

Turkey has been helped in recent months by money from Russia and Gulf countries. Qatar, Saudi Arabia and the United Arab Emirates have deposited billions of dollars with the Turkish central bank or set up multibillion-dollar investment funds.

Russia has deferred payments for natural gas as well as providing billions towards Turkey’s first nuclear power station.

“The economy has relied on financing from Russia, investments from the Gulf and that’s an area where Erdogan’s going to continue to focus,” Peker said.

He added that the next three to four months would be relatively calm for the economy as summer tourism revenues flow, a weakening lira makes exports more competitive and there is low domestic energy demand.

But by the autumn, Erdogan may face pressure to switch his economic policies.

“The current economic dynamics won’t be able to sustain Turkey’s needs,” Peker said. “Turkey will need more foreign inflows to manage its external payments and, given the negative interest rates, that’s hard to sustain.”

Western relations

Another subject requiring the president’s urgent attention as he starts his five-year term will be Turkey’s relations with its Western partners, in particular the issue of Sweden joining NATO.

Turkey and Hungary are the only NATO members holding up Stockholm’s bid to join the defence alliance, made in the wake of Russia’s invasion of Ukraine in February last year.

Sweden and the US have said they expect the membership issue to be resolved by the time NATO leaders meet in Lithuania in July.

Less than two weeks ago, Erdogan reaffirmed his opposition to Sweden joining. “We’re not ready for Sweden right now,” he said, citing Ankara’s concerns over Stockholm’s stance on what Turkey has labeled “terrorist” groups.

“If Erdogan continues to stall sign-off, I expect a major crisis in relations with the West,” said Ash, although he added that he anticipates a compromise on Sweden’s accession.

Erdogan “extracted whatever political capital he could from this pre-election, now he has won there is only downside by delaying the inevitable. So I expect Sweden to get NATO membership at the NATO summit,” Ash said.

Disputes with the West are also likely over human rights.

In his victory speech, Erdogan showed no sign of compromising over those considered “terrorists” by his government, and said he would not release Selahattin Demirtas, a leading Kurdish politician imprisoned since 2016.

The European Court of Human Rights ruled in 2020 that Turkey must free Demirtas, saying his incarceration was for political reasons, but the Turkish government alleges that Demirtas has ties to the Kurdistan Workers’ Party (PKK), which has fought a war against the Turkish state since 1984.

The PKK is considered a “terrorist” group in Turkey, the European Union and the US.

On the domestic front, Erdogan faces the huge task of rebuilding the southern provinces hit by earthquakes in February that killed more than 50,000.

The cost of the disaster has been put at more than $100bn by the United Nations Development Programme. Erdogan, who was backed by most of the region in the elections, has pledged to build 319,000 homes within a year.

Given a significant showing by nationalist voters in the elections and the widely held desire for the repatriation of Syrians to their home country, Erdogan will also be under pressure to show signs of returning refugees.

“It is our duty to fulfill our citizens’ expectations about this issue through ways and methods that befit our country and nation,” he said on Sunday night.

Turkey’s migration agency has said some 554,000 Syrians had been returned and Erdogan said another million would go to Syria within a year as new housing is built.

Source: Al Jazeera