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Turkish surprise: on ruling party’s losses in local polls

Turkish President Recep Tayyip Erdoğan had led the campaign for Sunday’s municipal elections from the front, so the reverses to his Justice and Development Party (AKP) have come as a personal jolt. The biggest blow to the Islamist party is the end of its long dominance of the capital Ankara and possibly Istanbul too. These polls were the first since Mr. Erdoğan was re-elected in June 2018, after Turkey switched to a presidential form of government authorised in a 2017 referendum. The Republican People’s Party (CHP), the principal Opposition, and pro-Kurdish parties have made huge inroads. They had managed to contain the AKP’s margin of victory in the June presidential and parliamentary polls. Given how much he had raised the stakes, the question is whether he will reconsider recent policies that have done little to restore investor confidence in the economy following the lira’s spectacular depreciation last year. Prices of food commodities in particular have remained high. But even as farmers and traders reeled under high fuel and fertilizer costs and unfavourable weather conditions, a government hamstrung by the ballooning deficit could do no more than turn its ire on them. It accused traders of hoarding stocks and spiking costs. In addition, local governments forced retailers to hold down prices. The move put a further squeeze on the sector and hurt the government’s electoral fortunes. A beleaguered Mr. Erdoğan unleashed the rhetoric of food “terrorism”, but was unable to deflect attention from the need for a fiscal stimulus. Stiffer fiscal targets set by the Finance Minister, who is Mr. Erdoğan’s son-in-law, have foreclosed any conventional avenues to contain the price escalation.

The travails are symptomatic of the conditions afflicting Turkey. They go back to the run on the currencies of several emerging economies, leading to the depreciation of the lira by a third. Ankara’s woes turned acute following the flow of hot money and large borrowings by businesses in external currencies. Mr. Erdoğan is opposed to higher interest rates, and the government’s response to halt the lira’s slide and contain inflation was belated. Conversely, lending rates in Turkey now are among the world’s highest, which makes lowering them quickly a risky proposition. The challenges are compounded by strained relations with its traditional allies, particularly the U.S. Washington has announced a halt to supplies related to the F-35 jets, in retaliation for Ankara’s decision to buy a Russian missile defence system. The diplomatic standoff over the detention of a U.S. pastor too was a factor behind the weakening of the lira last year. As the next elections are a few years away, expectations are that Mr. Erdoğan will adopt a more pragmatic approach to address the economic challenges.