Last Sunday, simultaneous presidential and parliamentary elections were held. As expected, incumbent President Erdogan won the presidential election with 53% of the vote, thus avoiding a second round run-off. In the parliamentary election, Erdogan’s ruling AKP lost its majority, winning 43% of the vote, 7pp less than in the previous election at end-2015. But Erdogan was saved by an alliance of the AKP with the nationalist MHP which surprised with gaining 11%. AKP and MHP had already teamed up last year to win approval in a constitutional referendum on the introduction of a new presidential system. Following these elections, that system will now come into effect, providing Erdogan’s with a much strengthened executive presidency. The TRY initially rallied by around +3% against the USD after Erdogan’s victory, but the gains have been wiped out in the meantime. Investors may have recalled concerns about Erdogan’s unorthodox economic views which had already intensified the TRY’s slide in May. A slowdown of the Turkish economy is already on the cards(see WERO 14 June 2018). How sharp it will be will depend on the economic policy course that President Erdogan will adopt now.
