Turkey could head to a runoff vote in an election that’s testing Turkish President Recep Tayyip Erdogan’s two decades in power.
(Bloomberg) — Turkey could head to a runoff vote in an election that’s testing Turkish President Recep Tayyip Erdogan’s two decades in power.
Early results on Monday showed Erdogan with a lead of more than 2 million votes but still without enough to avoid a second round on May 28. That would pit him against top rival Kemal Kilicdaroglu, 74, who has the backing of the nation’s broadest-ever grouping of opposition parties.
While it’s still possible for Erdogan to declare victory in the first round, a runoff contest is the most likely outcome, with more than 98% of ballot boxes counted.
The early results showed Erdogan winning 49.3% of the votes, while Kilicdaroglu secured 45% support, short of the 50% threshold needed to avoid a runoff. 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.
The polarizing campaign has whipsawed markets. The lira edged 0.2 percent lower to around 19.62 per dollar early Monday and Turkish state lenders had sold dollars to support the currency on Sunday evening ahead of official results.
Erdogan’s People’s Alliance parliamentary grouping was on track to maintain its majority, according to the initial tally by state broadcaster TRT.
In the end, 69-year-old Erdogan powered through and did better than many polls predicted ahead of the toughest election battle of his political life.
“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.”
Uncertainty for Markets
The prospect of two more weeks of uncertainty will likely weigh on the lira. Investors have been betting on the Turkish currency to weaken following the election, regardless of the result.
Lira Traders Brace for Volatility as Turkey Awaits Vote Outcome
“Two weeks of uncertainty is a scenario that markets dislike the most,” said Cagri Kutman, Turkish markets specialist at KNG Securities.
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 Erdogan vulnarable 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. Ahead of Sunday’s election, many opinion surveys showed Kilicdaroglu had the edge over Erdogan.
“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.”
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 an outright majority.
How Ogan’s electorate 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 any of the top two contenders.
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.
Turkey’s Stealth Interventions Hit $177 Billion Before Vote
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, Firat Kozok, Baris Balci and Kerim Karakaya.
(Updates lira, adds voter paragraph 15)
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