The economic crisis could reach historic lows if the Turkish president does not change his plans for the economy

Turkey's lira hits record lows after Erdogan's re-election

REUTERS/Murad Sezer - Oficina de cambio de divisas en Estambul, Turquía
photo_camera REUTERS/Murad Sezer - Currency exchange office in Istanbul, Turkey

It was the worst-case scenario for Turkish markets. The value of the Turkish lira weakened against the main currencies on the first day of the reopening of the markets after the narrow victory of Recep Tayyip Erdogan. The currency was quoted at 20.0559 lira against the dollar from 19.9727 at the close on Friday, and 21.6394 against the euro from 21.3739 on Friday. This is a historic figure for the Ottoman country, whose currency has lost 77% of its value in the last five years. 

The data comes in the worst projections of economists after the Turkish president's unorthodox economic policies. Erdogan raised interest rates to counter inflation, but produced just the opposite in a country already hovering around 44% inflation.

Erdogan's drift towards authoritarianism, with the replacement of parliamentary democracy by a presidency that accumulates more power, state control of the media, the imprisonment of opposition political leaders and his equidistance with the West and rapprochement with Russia also mark the decision of foreign investors. The key piece that Turkey needs to strengthen its currency once again.  

PHOTO/AP - The President of Turkey, Recep Tayyip Erdogan

"With the continuation of previous policies, the lira will continue to lose value," economist Mustafa Sonmez told EFE. The latest policies taken before the elections, far from following the strict precepts of economics, have been geared to purely electoral interests. Erdogan has increased public spending by raising civil servants' salaries and changing policies on the retirement age.  

The earthquake, the Achilles heel of the Turkish economy 

The devastating earthquake that struck Turkey on 6 February was the deadliest in the country's recent history. Nearly 50,000 people lost their lives and millions were left homeless. But behind the human problems, the consequences of the earthquake and recovery are devastating for the Turkish economy.  

The World Bank estimates the damage at more than $34 billion for the more than 300,000 homes destroyed, almost 4% of the country's annual economic output. This is less than the estimate of the Turkish Confederation of Business and Enterprise, which puts the total cost at $84.1 billion. Indirect costs aside.

REUTERS/UMIT BEKTASAR - Una mujer mira mientras los equipos de rescate buscan supervivientes bajo los escombros tras un terremoto en Hatay, Turquía, 7 de febrero de 2023
REUTERS/UMIT BEKTASAR - A woman looks on as rescuers search for survivors under the rubble after an earthquake in Hatay, Turkey, 7 February 2023

The anti-immigration component, the first consequence of the political crisis 

Refugees are no longer welcome in Turkey. Those nearly four million Syrians who crossed the border from devastated Syria after its long civil war are now a problem after the earthquake wiped out all the infrastructure they inhabited. In addition to the cost of rebuilding entire neighbourhoods and cities, there is the added demand to find work in the midst of a crippling recession.  

Anti-immigration sentiment is increasingly palpable, especially after weeks of election campaigning in which both Erdogan and Kiliçdaroglu have promised practical solutions. The Justice and Development Party's already victorious Erdogan has begun building schools, hospitals and housing in Syria to encourage the return of its citizens, clearly in tune with the restoration of relations with Bashar al-Assad. His opponent Kiliçdaroglu not only encouraged the return of refugees to Syria, but also made a last-minute deal with the far-right Umit Ozdag of the Victory Party. 

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