The Turkish president Recep Tayyip Erdogan triumphs once again in the elections, conquering almost absolute power, and as a consequence the Turkish lira rebounds on the currency markets. With 99% of the seats counted, Erdogan wins in the first round the presidential elections with 53% of the votes, while the coalition formed by his party, the Akp, and by the ultranationalists of the Mhp take home there absolute majority in Parliament with 343 seats out of 600. However, there is a negative note for the Sultan: the Kurdish party (HDP) he managed to pass the 10% threshold and will therefore have a voice, however weak, in Parliament. According to official data, the turnout would have been very high, equal to 87 percent.
The market reaction was immediate. The dollar/Turkish lira exchange rate it fell 2%, to 4,58, to a two-week low. Same trend for the euro/lira to 5,35 (-2%). Meanwhile, the Istanbul Stock Exchange salt by 2%. The rise in the exchange rate is also favored by the drop in oil prices, of which Istanbul is an importer, following last week's OPEC agreements.
According to the experts of Unicredit Research, the rebound of the Turkish lira mainly reflects the disappearance of political uncertainty in Turkey, even if the picture that emerges from the vote is the one considered least desirable by the markets in the medium-long term, given that there will be no probably changes in Erdogan's strategies that could support the revival of the country's economy. For this reason, analysts point out, after the local currency hedging, it is probable that the lira will face a new phase of decline.
In the last 14 months, the lira has already lost 30% against the US dollar (50% since 2015). In this scenario, Erdogan intends to open hostilities with the Central Bank, guilty in his eyes of having decided three interest rate hikes in the last two months. The President has never hidden that he wants to lead the country's monetary policy.
Thanks to the hyper-presidential reform launched last year, Erdogan will no longer have to deal with a premier, because his figure has been removed. And he will be able to count on a cabinet of ministers not obliged to answer to Parliament. Furthermore, the Sultan will be able to appoint the members of the Superior Council of the Judiciary, the prosecutors, and will also be able to issue executive orders (but not in matters of fundamental rights and political rights). All this while remaining at the head of his party and choosing candidates for Parliament. He will also have a number of powers over the budget.
