​Special Brief: Election Timing and Exchange Rate Management

TURKEY - In Brief 27 May 2022 by Atilla Yesilada

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Introduction We shall not publish a Weekly Tracker this Sunday, on account of Murat Ucer being out of town on business. Instead, I wanted to share my preliminary conclusions on two topics which topped the FAQ list in our recent contacts with our audience. These are election timing and the fate of Turkish Lira.In my vision of the near future, these two are intimately related. Specifically, I have now decided that Erdogan and Bahceli intend to call snap elections before the end of the year, but the most important prior condition for their electoral success, namely a modicum of exchange rate stability, is very difficult to achieve. Thus, I must conclude elections will be deferred to earliest April 2023, which opens the door to a couple of very ugly scenarios. Erdogan and Bahceli intend to call early elections Even though both the Palace spokespeople and top honchos from AKP-MHP deny any intention to call early elections, there are very strong tell-tale signs of preparations being made in that direction. Let’s list these to justify my conclusion: Fiscal stimulus:I’ve covered this aspect of “election platform” in the recent briefs, but in a nutshell, mid-year salary, wage and pension hikes in excess of the mandatory cost-of-living adjustment promise to inject substantial income into households, thus creating a fleeting sense of well-being.Additionally, two Turkey-specific complaints by up to 6.5 million retirees and civil servants will be addressed in a manner to increase personal spending and social security contributions. These are paying pensions to EYT victims and adjusting upwards the salary scales of a large group of public servants by declaring their positions “socia...