Recep Tayyip Erdogan:-

Recep Tayyip Erdogan, the President of Turkey, has secured an election victory that seemed improbable just a few weeks ago. This outcome has raised concerns among Western governments and international investors, as it suggests a potential increase in tensions.

Erdogan, who has been in power for a long time, managed to win with 52.1% of the vote in a runoff against his opposition challenger, Kemal Kilicdaroglu.

Erdogan expressed his gratitude to the Turkish people for keeping him in power during a celebratory event in Istanbul.

The stage for Erdogan's victory was set on May 14 when he defied expectations by coming close to winning outright in the first round of voting. His alliance of parties also secured a parliamentary majority.

However, this electoral success led to a decline in stocks and bonds, and the Turkish lira has continued to weaken against the US dollar.

Erdogan, who has consolidated power in Turkey, has shown resilience in the face of challenges before. Despite predictions of a closer election due to economic hardships and recent earthquakes, he managed to mobilize his conservative grassroots and exploit divisions within the opposition alliance with the help of state media.

The main concern for investors now is whether Erdogan will stick to his promise of maintaining the economic policies that have led to a significant outflow of foreign investment.

On the other hand, world leaders are also interested in how Turkey will navigate its delicate relationship with NATO allies and Russia, particularly as the conflict in Ukraine, which involves President Vladimir Putin, continues.

Economists argue that a monetary policy adjustment is inevitable for Turkey. While central banks worldwide have raised interest rates to tackle inflation, Turkey's policymakers have adhered to Erdogan's preference for low borrowing costs. They have reduced the benchmark rate by 550 basis points despite inflation exceeding 85%.

With Erdogan's victory, it is unlikely that he will adopt a more orthodox economic approach, although some adjustments may occur ahead of the local elections in March 2024.

Turkey has relied on measures such as restricting banks in the foreign exchange market and interventions to stabilize the lira. However, economists argue that the current divergence between deposit rates and the benchmark rate is unsustainable.

Barclays Plc's Ercan Erguzel believes that regardless of Erdogan's victory, interest rates will need to rise, albeit at a more gradual pace than if Kilicdaroglu had won. Erguzel predicts that the benchmark rate will reach 36% by the end of the year, compared to the current 8.5%.

Regarding foreign policy, Erdogan's next five years in office are expected to see Turkey playing a crucial role as a buffer for migrants heading toward Europe. Turkey will also aim to maintain grain exports from the Black Sea after securing an extension recently.

Erdogan also intends to support peace efforts in Ukraine while avoiding imposing sanctions on Russia, considering them counterproductive.

It is reported that Erdogan will consider Sweden's implementation of new terrorism legislation before agreeing to ratify its bid to join NATO.

Furthermore, he may need to carefully balance his approach towards Sweden to gain support from the US Congress for Turkey's purchase of American-made F-16 fighter jets.

During his new term, Erdogan is expected to prioritize the development of Turkey's domestic defense industry to strengthen its Military capabilities and establish Turkey as a regional power.

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