Turkey is set to head to a runoff in a vote that’s become the strongest electoral test yet of President Recep Tayyip Erdogan’s two decades in power.
(Bloomberg) — Turkey is set to head to a runoff in a vote that’s become the strongest electoral test yet of President Recep Tayyip Erdogan’s two decades in power.
While preliminary results Monday showed Erdogan with a lead of more than 2 million votes, it wasn’t enough to secure the more than 50% of the ballot and avoid a second round. Another vote on May 28 will pit him against top rival Kemal Kilicdaroglu, 74, who’s backed by Turkey’s broadest-ever grouping of opposition parties.
A runoff is now seen as the most likely outcome, people with direct knowledge of the vote tally said. Millions of ballots were still being counted Monday, with 99% of the ballot boxes opened.
The preliminary results showed Erdogan winning 49.4% of the votes, while Kilicdaroglu secured 45% support. Another contender, Sinan Ogan, received 5.2% and was eliminated from the race.
“While the final results are not clear, we’re ahead with a big margin,” Erdogan said in a speech from the balcony of his party headquarters in Ankara.
“Our nation has made its decision,” he said. Turnout was around 89%, the state-run Anadolu Agency said.
A runoff would be the first under the current electoral system and suggests a more divided electorate than in 2018, when Erdogan won in the first round. That was the first vote under the new executive presidency Erdogan set up that extended the role’s powers and which critics say eroded Turkish democracy.
“If our nation says second round, we respect that,” Kilicdaroglu said after the release of initial results on Monday. “Erdogan could not get the results he desired.”
Uncertainty for Markets
The polarizing campaign has whipsawed markets. Turkish stocks slumped as much as 6.7% Monday before triggering a halt in trading. The lira fell to around 19.61 per dollar and Turkish state lenders sold dollars to support the currency on Sunday evening ahead of official results.
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“Two weeks of uncertainty is a scenario that markets dislike the most,” said Cagri Kutman, Turkish markets specialist at KNG Securities.
In the end, Erdogan powered through and did better than many polls predicted ahead of the toughest election battle of his political life.
Erdogan’s People’s Alliance parliamentary grouping was on track to maintain its majority in the assembly, according to the initial tally by state broadcaster TRT.
“Sunday’s result marks a huge win for Erdogan,” Emre Peker, Europe director for Eurasia Group, said in an e-mailed note. “The president is likely to ride his strong approval rating, surprise win in parliament, and incumbency advantages to secure reelection in the run-off.”
A surprise showing by Ogan, the third candidate in Sunday’s race who ran on anti-immigrant platform, was a key factor in keeping the front-runners from securing a majority.
How Ogan’s voters might behave in the second round could swing the vote in either direction. In remarks late Sunday, Ogan criticized Erdogan’s unconventional economic views and refrained from endorsing either of the top two contenders.
Erdogan, the country’s longest-serving leader, has molded the NATO member into a regional power that plays a growing role from Ukraine to Syria.
He even maintained strong support in much of the area hit by the devastating February earthquakes that left more than 50,000 people dead. Survivors and opposition parties have accused the government of not responding to the disaster adequately.
But increasingly erratic economic policies left him vulnerable after an inflation crisis last year gutted household budgets.
“It would be good if there was a change,” said 55-year-old gas station worker Cengiz Caliskan, who had voted for Erdogan in the past but backed Kilicdaroglu this time.
“I didn’t think Kilicdaroglu would do a better job than Erdogan but the same people were getting rich by staying in power too long.”
Kilicdaroglu was running on a promise to restore the rule of law, mend strained ties with the West and return to economic orthodoxy.
Another term for Erdogan would likely mean a continuation of “unorthodox and unsustainable policies” and macroprudential measures, Moody’s Investors Service wrote in a note. This would have a heightened risk of very high inflation and severe currency pressures, it added.
If Kilicdaroglu were to win a second round and implement more orthodox economic policies, that would be positive for Turkey’s credit rating, Moody’s said, adding the path to this would be challenging.
All Eyes on Economy
It’s Erdogan’s approach to the economy that will likely dominate the final stretch of campaigning.
The lira has been under pressure since Erdogan ramped up a slew of unorthodox policies starting in 2018, including state interventions in FX markets and interest-rate cuts even as inflation surged. Turkey will be under pressure to double down to hold the lira stable in the coming weeks.
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The central bank will hold its next rate-setting meeting on May 25, three days before the runoff vote.
“I would expect Erdogan and his government to maintain market stability at all costs going into the second round,” said Nick Stadtmiller, head of product at Medley Global Advisors in New York. Any dip in Turkish markets “would suggest a chink in the armor of Erdogan’s policies.”
–With assistance from Taylan Bilgic, Inci Ozbek, Tugce Ozsoy, Baris Balci, Kerim Karakaya and Demetrios Pogkas.
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