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Narrow Turkish Referendum Victory Reveals Economic Concerns


Supporters wave flags as Turkey's President Recep Tayyip Erdogan delivers a speech during a rally of supporters a day after the referendum, at his palace, in Ankara, April 17, 2017.
Supporters wave flags as Turkey's President Recep Tayyip Erdogan delivers a speech during a rally of supporters a day after the referendum, at his palace, in Ankara, April 17, 2017.

Turkish President Recep Tayyip Erdogan's referendum victory to extend his powers was bittersweet.

For the first time he lost in Turkey's main cities, including Istanbul, which has been his electoral power base since 1994. In the aftermath of his narrow win he has ordered a party investigation into the vote. The drop in support coincides with an economic slowdown, an ominous sign given the president is facing crucial polls in two years.

Erdogan’s unprecedented electoral successes were largely achieved in a period of economic boom, but those halcyon days appear to be waning.

"Currently, inflation rate is at 11.3 percent and is expected to increase further to around 12 percent in the coming months,” observes Inan Demir, an economist for Nomura Bank, “It would constitute the highest inflation rate since before the global financial crisis in 2009. Also, unemployment is at multi-year highs. So we are talking about a significant jump in the inflation and unemployment rate."

The impact of the economic slowdown has been felt the most in western Turkey, where more than 70 percent of the country's economic production is located, and most closely linked to European markets. The same region saw some of the biggest drops in support for the president in the referendum vote. While the Turkish economy is predicted to grow faster than that of Europe, it is still below the rate needed to absorb new entrants into the labor market.

Disaffected youth

A striking development of the referendum was the youth vote, overwhelmingly voting no, bucking its traditionally stalwart support for Erdogan.

"Youth unemployment is affecting the first-time vote. The youth unemployment ratio was 25 percent, according to the last data, notes Atilla Yesilada, a political consultant with Global Source Partners, “Fifty-eight percent of first-time voters voted "No." (citing IPSOS research). According to OECD research, Turkish students are the unhappiest in the world with 72 percent saying they are very unhappy with conditions. So given Turkey's very high rate of young population, up to six percent of the voters in the next election cycle, which starts in March 2019, will be first-time voters, which in my view is slipping from their [Erdogan government's] grasp”.

2019 is scheduled for an unprecedented three polls - of local, general and presidential elections.

FILE - People of the Turkish community living in Germany, supporting Turkish President Tayyip Erdogan, celebrate on Kurfuerstendamm boulevard after news bulletins on the outcome of Turkey's referendum on the constitution, in Berlin, April 16, 2017.
FILE - People of the Turkish community living in Germany, supporting Turkish President Tayyip Erdogan, celebrate on Kurfuerstendamm boulevard after news bulletins on the outcome of Turkey's referendum on the constitution, in Berlin, April 16, 2017.


Erdogan’s success in the referendum was due in part to the overwhelmingly support he received in the rural heartland of the country, known as Anatolia, a region that has particularly benefited from the expansion of social security benefits under Erdogan’s AK Party rule.

“I detect that certain voters are becoming clients of AKP, these people can't survive in the globalized economy of Turkey,” claims consultant Yesilada, “they are largely existing on account of the welfare state and also AKP has been very successful in imposing the view entitlements are coming form the party, rather than the state. So a dependency has been created between the poor in Anatolia and AKP, and these are people are so afraid if AKP ever loses they will lose their entitlements.”

In the run-up to the referendum, the government again turned to state intervention, launching major programs of cheap loans for businesses, job creation schemes, and massive public works projects.

Early elections?

Economists predict that with individuals and private companies racked with debt, more state intervention is likely, ”Turkey will find it difficult to sustain that debt-fueled growth, that's why the public sector will play an increasing role in supporting economic activity going forward. Personally, I expect elections to be held earlier than the current schedule. I would not be surprised to see elections by this time next year. So I think it can be sustained until that time."

The pressure to call early elections will deepen worries about how the government will fund it’s growing economic and financial programs. “So [numbers] are simple,” warns Yesilada, “we cant borrow abroad, because it very costly or foreign lenders are no longer willing, and Turkish deposits have been completely converted into loans. I don't know how this can go forwards.”

Given that the bedrock of Erdogan's electoral success has been built on economic prosperity, the continuation and trajectory of those programs ultimately could determine his fate.

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