Erdogan Seen Winning After Turning IMF-Hooked Turkey Into Mideast’s Model
Recep Tayyip Erdogan is set to win a third term as Turkey’s prime minister and a mandate to reshape the secular constitution, as the country enjoys an economic boom that stands out amid upheaval to the east and west.
Erdogan’s Justice and Development Party or AKP may win 49 percent in June 12 elections, almost double the 26 percent backing the main opposition Republican People’s Party, according to the average of four surveys by researchers Pollmark, Sonar, Konsensus and Genar. The studies were carried out between May 17 and May 31. The AKP came to power with 34 percent of the vote in 2002 and won 47 percent four years ago.
Erdogan’s priority, in a third term that could make him the longest-serving leader since Turkey’s founder Mustafa Kemal Ataturk, is a constitution to replace the charter drafted after a 1980 coup. That would cement his victory over generals who accuse him of imposing Islamic values. Campaigning, he hammers on the transformation of Turkey’s economy. Once a regular applicant for International Monetary Fund loans, it now has Europe’s highest growth rate, borrows more cheaply than Spain, and is cited as a model by Middle Eastern opposition movements.
“Turkey has got a really genuine chance to move to the next stage,” said Plamen Monovski, chief investment officer of Renaissance Asset Managers in London, which oversees $2.5 billion in emerging market assets. “They’ve done a magnificent job of economic governance, the results of which are there for everyone to see,” said Monovski, who’s been investing in Turkey for a decade. “I hope in the third term there’s no hubris.”
‘Building Modern Turkey’
Turkey’s $740 billion economy grew at an average annual rate of more than 5 percent during nine years of AKP rule, making it the world’s 16th largest. Deputy Prime Minister Ali Babacan today forecast 6 percent growth this year. Inflation slowed to about 7 percent from 30 percent, and the benchmark ISE-100 stock index more than quadrupled in dollar terms.
Turkiye Garanti Bankasi AS (GARAN), the biggest Istanbul-listed company by market capitalization, surged more than tenfold and Turk Telekomunikasyon AS (TTKOM), the previously state-owned phone and Internet company, has gained 76 percent since an initial public offering in May 2008.
On the campaign trail, Erdogan promises new investments --a canal to link the Black Sea and the Marmara, high-speed railways, roads and bridges -- and dismisses opposition charges that he’s gathering too much power in his own hands. “We’re building a modern Turkey,” he told an Istanbul rally June 5. “I’m talking about projects. What are they talking about?”
Erdogan’s plan for a new constitution has also been a central campaign issue. He argues for shifting from the current parliamentary system to a presidential one, in which he himself would be the leading candidate for the top job.
“It still slightly worries me that Erdogan portrays himself as the natural long-term leader of Turkey,” Katinka Barysch, deputy director at the Centre for European Reform, said in an interview. “A country too centralized, too focused on one personality usually leads to very bad decision-making because if one leader is in power for too long he’s usually surrounded by yes-sayers.”
Erdogan would need 330 votes in the 550-member parliament to put a new constitution to a public vote, and 367 to pass it straight into law.
The premier said last week he would “find it unnecessary” to hold a referendum if he wins a big enough majority to change the constitution without one. He currently holds 331 seats and would win 338 based on the four-poll average, according to an application that simulates election outcomes developed by the Ari Movement, an Istanbul think-tank.
A charter approved by the public “would feel much better for markets than if they do it by themselves by getting two- thirds of the seats,” said Elisabeth Andreew, strategist at Nordea Bank AB in Copenhagen.
Chasing Investment Grade
On the economy, Erdogan’s third-term challenges will include a widening trade gap that threatens an abrupt halt to Turkey’s boom. The current account deficit ballooned to more than $60 billion in the 12 months through March, compared with a government forecast of $42 billion for the year.
The AKP will probably win and should then make “much- needed adjustments in policy,” said Michael Gomez, co-head of emerging markets at Pacific Investment Management Co., manager of the world’s biggest bond fund, which owns Turkish debt. “The economy still has some structural weaknesses that need to be addressed before they are able to achieve the long-sought investment-grade rating.”
Fitch Ratings, which ranks Turkey one step below that status at BB+, said in October that changes to the constitution after elections could justify an increase. Moody’s Investors Service and Standard & Poor’s both rate Turkey two levels below investment grade.
Erdogan can point to economic improvements that brought four S&P upgrades under his government. Treasury projections show that Turkey -- once the IMF’s biggest borrower after tapping it for about $26 billion of loans following a 2001 banking crisis -- will pay off its remaining $4.9 billion debt to the Fund by 2013.
That’s a contrast with the European Union countries, including Turkey’s neighbor Greece, that have been forced to take IMF loans in the past two years as their economies unraveled amid a debt crisis. Rebuffed in its efforts to join the EU, Turkey now borrows at 10-year yields lower than at least eight members of the 27-nation bloc.
In the Middle East, where popular revolts have swept away longtime leaders this year, Erdogan’s political success and Turkey’s economic progress have been cited as a model by opposition parties including Egypt’s Muslim Brotherhood.
About 50 million Turks are registered to vote on June 12, with polls due to close by 5 p.m. and initial results expected within a few hours.
Recalling earlier elections, Hatem Ete of the Ankara-based Foundation for Political, Economic and Social Research says the key difference this time is that parties are offering long-term projects.
“All the general elections in Turkey’s recent past were held to overcome a crisis,” he said in a telephone interview from his office in the capital. “This time, it’s about how to build the country’s future.”
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