Opposition alliance falls short of outlining economic reforms, as Turkey goes to polls

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President Recep Tayyip Erdogan will face double-digit inflation and the aftermath of February's devastating earthquake in the May 14 election, as opposition parties plan to capitalize on the deteriorating economy despite Erdogan's pledge to reduce inflation to single digits and restore the country's economic health.

Analysts predict that the six-party opposition front led by Kemal Kilicdaroglu will not be able to convert voters' displeasure with Erdogan's economic strategy into electoral success. They assert that despite an unreliable economy and poorly executed post-quake reconstruction measures, the Turkish voters would not be affected, especially because the Republican People's Party (CHP) has failed to propose a practical economic program to help the country escape its current economic deadlock.

Erdogan’s policies 

Turkey's economic recovery from the 2001 financial crisis was facilitated by Erdogan's economic reform initiatives, on which he won the 2018 elections. He was able to attract significant investments in infrastructure projects like high-speed rails, airports, and roads. However, by reducing the Central Bank's autonomy and pursuing a highly eccentric monetary policy, Erdogan significantly contributed to the currency and debt crisis that began in 2018.

Leading economists strongly disagree with Erdogan's claim that high-interest rates caused inflation to soar and deter investment in the country. To advance his unorthodox economic agenda, he pressured the central bank to lower policy rates, and repeatedly fired central bank governors and members of his monetary committee one after another. His theories that low-interest rates will increase corporate borrowing for export-driven industrial development and that the current account surplus will support the lira were rejected by many economic professionals.

These policies caused inflation to exceed 48% on a year-over-year basis in March after reaching a 25-year high of 85% in October last year. Some contend that the figures provided by the government are downplayed and that the actual figures are much higher. They think Erdogan's administration is "playing with the figures" to paint a more positive picture of the economy.

How bad is economic health?

This is the worst inflation crisis Turkey has ever experienced during Erdogan's more than two decades in power. The February earthquakes, which claimed more than 50,000 lives and left the government facing an estimated $100 billion in restoration expenditures, exacerbated the country's economic problems.

In a recent update published by the World Bank last month, the bank noted that Turkey's economy grew by 5.6% in 2022, down from 11.4% in 2021, as exports, investment, and manufacturing activity lost momentum. Turkey is the nineteenth largest economy in the globe, with a gross domestic product of approximately $906 billion.

In the past decade, productivity growth has slowed as reform momentum has waned. In the face of a deteriorating external environment and heterodox monetary policies, the economy has been losing momentum. As many as 11 provinces, comprising 16.4 percent of Turkey's population and 9.0 percent of its economy, sustained physical devastation from the earthquake. The estimated direct losses are $34.2 billion, but the reconstruction costs could be double that amount.

Erdogan's popularity decreased as a result of the economic crisis, and his party lost the 2019 local elections in big cities like Ankara and Istanbul for the first time in 15 years. The majority of Turks continue to accept Erdogan's neo-Ottoman foreign policy despite these challenges.

Political reforms carried out in the early years of Erdoan's leadership allowed Turkey to start EU membership negotiations. He supported the constitutional referendum that resulted in Turkey's transition from a parliamentary to a presidential system of government, and soon after he won the general election in 2018, the new system of rule became law. To form the People's Alliance government, his party was forced to make a coalition with the Nationalist Movement Party (MHP) after losing the majority in the legislature.

Opposition’s narratives

Many of Erdogan's well-known economic, foreign, and civil rights policies are currently being challenged by the Republican People's Party (CHP), a coalition of six parties with Kemal Kilicdaroglu as its presidential candidate. Kilicdaroglu promised last week that if his party wins the next presidential and legislative elections, he would repatriate Syrian refugees.

However, the opposition parties failed to offer a workable economic strategy and instead pushed for a reversal of Erdogan's economic, political, and foreign policy decisions, which will hardly address the challenging task of economic recovery amid sky-high inflation and the lowest-ever policy rate, which is currently at 8.5%. The parties opposing Erdogan's presidency have not clarified how they plan to handle the escalating fiscal obligations brought on by recent foreign loans and the steep depreciation of the currency.

The media cited Bilge Yilmaz, 55, the second-largest affiliate of the six-party opposition alliance and the party's director of economic strategy, as stating, "The wreckage of the century would be our inheritance if we win the election. We commit to going back to sound, data-based monetary policy and to maintaining budget restraint to make a difference."

Yilmaz is a longtime lecturer at the University of Pennsylvania's Wharton School and possesses a doctorate in economics from Princeton University. He is viewed as a strong candidate to become Turkey's next economic czar. He believes that in two years, inflation can be brought down to single digits with the support of “prudent fiscal policy and an independent central bank.” Nonetheless, he failed to divulge the features of fiscal policy parameters and the legal framework to make the central bank an independent entity. He asserts that the economy will rebound if it targets an inflation-controlled strategy based on quarterly assessments rather than yearly ones and has an autonomous central bank, warning that if Erdogan’s policies continued, Turkey would have a balance-of-payments crisis.

In a bid to display its resolve to mend the economy, the six-party alliance is deliberating on the appointment of a former deputy prime minister Ali Babacan as vice president responsible for the economy if it wins a presidential election set for May 14. Previously a close ally of President Recep Tayyip Erdogan, Babacan left the Party in 2019 due to differences in its orientation and founded the Deva (Remedy) Party. Under Erdogan, he was in charge of the economy, which deteriorated during the period he was in charge. It remains to be seen how a man who could not effectively manage the economy during his first term in office will turn it around during his second.