Turkey’s president, Recep Tayyip Erdoğan, is a populist juggernaut, fond of suggesting that his leadership is the only way to protect the country from enemies both real and imagined. The coronavirus pandemic, however, is an existential crisis unlike anything he has faced before. The economy went into a tail-spin as earyl as March, judging from industrial production declining by 2% MoM and retail sales declining by 8.1% MoM.
“Erdoğan has gradually managed to reform Turkey’s constitution, consolidating power into the presidency’s hands,” said Nate Schenkkan, the director for special research at Freedom House, a US-based democracy watchdog. “When the country grapples with the economic fallout from coronavirus, there will be few scapegoats left to blame. He may become a victim of his own success.”
Forecasts point to a deep recession
There is little doubt a major pandemic-induced financial crisis is about to hit Turkey. The International Monetary Fund (IMF) forecasts that the country’s economy will shrink by 5% for 2020, driving up inflation to 12% and unemployment to 17.2%. Some predictions paint an even grimmer picture in which unemployment could reach 30%. EBRD forecasts a 3.5% GDP decline, followed by Fitch with 2%.
The Turkish lira dropped to a record low this week of nearly 7.27 to the dollar, before recovering to 6.90, as the swap market was shuttered to prevent short selling of the TL. Central bank interest rate cuts intended to boost growth – as well as investor fears over Turkey’s depleted foreign currency reserves – began to bite.
In speeches, Erdoğan has repeatedly ruled out the possibility of an IMF bailout, and comments from a US Federal Reserve official this week suggested a credit swap line to cushion the lira’s fall will not be forthcoming.
“Informally, inflation in Turkey is already well above the official rate. Interest rate cuts mean the government is paving the way for new currency shocks and high inflation,” said the economist Selçuk Geçer.
“Turkey was already completely broke when coronavirus hit. We are looking at a very deep and prolonged recession.”
Turkey is the seventh worst-affected country hit by Covid-19 with 137,115 cases and 3,739 deaths – although as is the case in many countries, the toll is probably underreported.
Yet Erdoğan, usually no stranger to heavy-handed tactics, has resisted calls to order people to stop going to work and stay home, insisting the “wheels of the economy must keep turning”.
For the president, renewed economic turmoil could be a mortal blow: over the last two years the economy has become a major vulnerability for his ruling Justice and Development party (AKP).
The lira crash of 2018 sent inflation soaring to 25% and triggered a recession – a sober end to years of an average of 5% economic growth which had buoyed Erdoğan.
After a disastrous defeat in March 2019 local elections, both the former prime minister Ahmet Davutoglu and the former finance minister Ali Babacan quit to form their own breakaway opposition parties. While Turkey is not supposed to hold a general election until 2023, under the new presidential system opposition party alliances would only need to shave off a few percentage points from the ruling coalition to destroy the government’s already weakened majority.
Some observers believe last year’s events show that Erdoğan’s political decline has already begun: the fallout from the coronavirus pandemic will certainly give opposition groups the opportunity to strengthen their positions.
If an election were held now, latest polling from the Istanbul Economics Research Centre says the AKP would lose 7% of its vote share – and that one in four AKP voters do not trust the coronavirus statistics released by the health ministry. PA Turkey’s poll-of-polls reveal AKP-MHP votes drooping to 48% with undecideds distributed according to raw vote shares, a 4 percentage point retreat since last general elections.
When cornered, however, the Turkish government tends to lash out, and the Covid-19 crisis has been no exception. More than 400 people have been detained for allegedly sharing “false and provocative” social media posts over the government’s handling of the pandemic, as well as several journalists.
Rules came into force on Thursday that will also punish negative speculation by individuals or institutions over the health of Turkey’s financial system.
The removal of elected officials – mostly from the pro-Kurdish Peoples’ Democratic party (HDP) – has also continued apace. A year after the last round of local elections, 40 out of 65 municipalities won by the HDP are now under the control of government-appointed trustees.
According to MAK survey, participants object to Erdogan’s relentless obstruction of CHP mayors, which sabotages relief efforts at a time when government has not done enough to care for the needy and the recently unemployed.
Turkish observers claim Erdogan’s junior partner Mr. Bahceli of nationalist MHP has sensed AKP’s decline, potentially getting ready for snap elections once the outbreak is under control. Others argue that the party is deeply divided among several factions, which will settle accounts then, too. If the latter observation is correct, more AKP voters could gravitate towards Davutoglu and Babacan parties.
Erdogan has now staked his career on a quick end of the outbreak, as well as a V shaped recovery. The summer will decide his fate.
The Guardian, al Monitor, PA Turkey, MAK Consulting
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