Tight policies under scrutiny after AKP election defeat

What’s happened?

On March 31st the ruling religious-conservative Justice and Development Party (AKP) of the president, Recep Tayyip Erdogan, suffered substantial losses to the main opposition Republican People’s Party (CHP) at local government elections. In spite of the election results, the administration is likely to persist with its recent tighter economic policies.

Why does it matter?

The CHP took a larger vote share (about 38%) than Mr Erdogan’s AKP (about 35%). The incumbent CHP mayors of Istanbul and Ankara, Ekrem Imamoglu and Mansur Yavas, were re-elected with increased majorities. Mayoral candidates from the traditionally secularist and left-of-centre party also gained numerous district municipalities in the two largest cities from the AKP. The CHP retained almost all its existing mayoral seats in southern and western coastal cities and recorded significant gains in other, mainly western, provinces. About 49 of Turkey’s 81 provincial centres will have CHP mayors.

Economic issues prevailed over identity concerns in the local elections. Despite tightened policies since June, Turkey’s high inflation delivered a hard defeat to the AKP, with many—most particularly pensioners—abstaining (turnout dipped below 80%) or turning to the far-right New Welfare Party (YRP) in a protest vote. The AKP’s campaign and candidates failed to inspire. At the same time the CHP focused consistently on economic grievances, including those of pensioners, successfully appealing to voters beyond the party’s traditional base. Although the result will revitalise the opposition, Mr Erdogan’s power will remain largely unchecked.

We will monitor whether the orthodox economic programme that started in June will be maintained, especially given Mr Erdogan’s known preference for ultra-low interest rates. The election results could weaken the commitment of the administration to tight, orthodox fiscal, monetary and incomes policies and make painful structural reforms in areas like taxation and labour markets less likely. Some AKP figures and pro-AKP businesses may exert pressure for more expansionary policies. However, we maintain our view that the current programme will be implemented. No major elections are due before 2028, and there is ample time for the AKP to reorganise. Furthermore, Mr Erdogan expressed a commitment to the existing government programme and to fighting inflation.

What next?

The president will reshuffle his cabinet and reallocate top party posts. However, the treasury and finance minister, Mehmet Simsek, will probably remain in place, and economic policy will remain relatively orthodox with a view to defeating inflation before the presidential and parliamentary elections in 2028.

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