Economic dynamics in the context of elections: Pre and post-election analysis

Türkiye has completed its elections with a remarkably high turnout. Following the parliamentary arithmetic revealed on May 14, President Erdogan was re-elected with a 52.2% vote in the second round on May 28.

The challenging economic conditions in Türkiye were evident in the pre-election period. The currency crisis in 2018, followed by the Covid-19 pandemic at the beginning of 2020, and the escalating global tensions due to the Russia-Ukraine War, have had significant negative impacts on the economy.

Rapidly rising exchange rates, increasing inflation, temporary closures of businesses due to the pandemic, and the halt in global trade have put additional strain on developing economies like Türkiye. These factors have contributed to a period of increased difficulty for such countries.

Furthermore, the tightening cycles of major central banks, which involved significant interest rate hikes to combat post-pandemic inflation, further intensified the pressure on the currencies of developing countries. Türkiye, of course, did not escape the effects of this situation.

Both domestically and internationally, the deteriorating economic climate led to an attempt to create a perception that voters would distance themselves from Erdogan in the pre-election period, regardless of the opposing candidate. Particularly in the opposition media, we observed the prolonged emphasis on this issue, supported by later inconsistent polls, and attempts to influence voters based on some negative macroeconomic indicators.

Clearly, the literature in the Western world frequently employs the linear correlation between a country's economic performance and the percentage of votes garnered by the ruling power and/or leader. In fact, the opposition often designed their election campaign around Süleyman Demirel's famous quote, "There is no power that the pot cannot overthrow."

However, there was an overlooked factor by the opposition. Despite the economic challenges, income increases at compensatory levels, along with wage hikes, helped mitigate the losses in purchasing power, resulting in the relatively lesser impact of economic difficulties. The prolonged supportive movement of the credit channel also aided in sustaining production and consequently employment.

On the other hand, the biggest mistake was reading the Turkish voter solely through the lens of economic pragmatism. There was an expectation that voters would make their choices solely based on the deterioration of economic conditions. However, as I previously mentioned in this column on May 13, 2023, "...the correlation between economic conditions and the ruling party's vote, as we have seen in other country examples, often did not work in Türkiye. In many elections, we observed that economic conditions took a backseat, and the voters prioritized the foreign policy stance and national issues." Thus, I expressed my belief that the voters would lean towards Erdogan in the current election process. And indeed, it turned out that way.

While the pre-election situation in the economy was as described, attention shifted back to the economy after the completion of the election process. We can see that Erdogan, who has been reelected, has placed the economy as one of his top agenda items. In both his victory speech on election night and his speech at the 79th TOBB General Assembly, Erdogan delivered messages emphasizing his sensitivity towards "inflation."

Of course, the issue is not limited to inflation alone. The most curious question is how the economic management will shape up in the new cabinet. Various sources circulate information that requires confirmation on this matter. Ultimately, President Erdogan will make the final decision. However, in order to make a sound interpretation regarding the trajectory of the economy post-election, it is necessary to see the formation of the economic management and how it will operate.