Now, Erdogan Faces Turkey’s Troubled Economy. And He’s Part of the Trouble.

By Carlotta Gall

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With his victory in Sunday’s elections, President Recep Tayyip Erdogan has taken his place among the world’s emerging class of strongman rulers, nailing down the sweeping powers he has insisted he needs to address Turkey’s numerous challenges, at home and abroad. Now, all he needs to do is deliver. “He won on a knife-edge,” said Ugur Gurses, a former banker who writes for the daily newspaper Hurriyet. “But now he has in his lap all the problems.” Mr. Erdogan is contending with an array of economic troubles, an increasingly disgruntled populace and deteriorating relations with Turkey’s Western allies. Among the many problems Mr. Erdogan faces is one fundamental roadblock: His foreign policy is fighting with his economic needs.

His increasingly authoritarian, nationalist and anti-Western bent is alienating foreign investors, which is hurting the Turkish lira. As the currency plunges, domestic capital flees. And he is newly reliant on a nationalist party that enabled him to maintain his majority in Parliament but promises to reinforce all those tendencies, as well as his hard line against the Kurdish minority.

The lira briefly rose with the news of Mr. Erdogan’s re-election, and his most senior economic adviser posted a message on Twitter on Sunday night: “This sets the stage for speeding up #reforms.”

The economy is Mr. Erdogan’s most pressing problem, but analysts express doubt that he will be able to perform the necessary surgery and introduce needed austerity measures with municipal elections looming in March 2019.

“Now the first challenge is the deterioration of the economy, and he has no means, no perspective to change the course of events,” said Kadri Gursel, a columnist for the newspaper Cumhuriyet, who was imprisoned by Mr. Erdogan for 11 months.

ImageAfter years of strong growth, the Turkish economy is languishing in recession, economists say, with rising foreign debt levels, double-digit inflation, a sagging lira and paltry levels of foreign investment.CreditEmrah Gurel/Associated Press

Mr. Gursel said Mr. Erdogan offered no ideas during his campaign to explain how he would lift the economy, except more of the same. “He could not offer a vision for the future,” Mr. Gursel said. “All he could offer was infrastructure projects and a bad representation of the past.”

After years of strong growth, the economy is languishing in recession, economists say, with rising foreign debt levels, double-digit inflation, the sagging lira and paltry levels of foreign investment, compared with past years. An increasing government role in the economy has led to charges of cronyism and corruption, with critics complaining of insiders becoming fabulously wealthy on government contracts and sweetheart deals.

Many economists also blame the dismal economic performance on Mr. Erdogan’s increasingly authoritarian rule, following a failed coup attempt two years ago.

In the aftermath, he declared a state of emergency and began a widespread crackdown against his political opponents, confiscating businesses in the process and prompting many wealthy Turks to shift their companies and capital out of the country. And he spooked foreign investors with his anti-Western belligerence and meddling with the central bank to keep interest rates artificially low.

As the election results underscored, Mr. Erdogan still maintains the strong backing of the newly prosperous Islamists who were long marginalized under the secular republic founded by Mustafa Kemal Ataturk; people who, like Mr. Erdogan, as the historian Soner Cagaptay has written, were “born on the wrong side of the tracks.”

The transfer of power and wealth to those newcomers over the past 15 years represents a transfer of capital that is permanently changing Turkey, said Bekir Agirdir, director of the polling firm Konda.

“The government subsidizes them and they come up and become so successful,” Mr. Agirdir said of the newcomers. “It is social and political engineering.”

And while ordinary Turkish citizens are hurting financially, they evidently still trust Mr. Erdogan. Ozgur Unluhisarcikli, the Ankara director for the German Marshall Fund of the United States said in an interview, “There is this worry that, ‘What would happen if Erdogan goes?’ ”

Mr. Erdogan addressed his supporters on Sunday. Among the many problems he faces is one fundamental roadblock: His foreign policy is fighting with his economic needs.CreditKayhan Ozer/Presidential Palace, via Reuters

“The economy is suffering, there is an issue of performance in some areas, but those were not reflected in the vote,” he added.

Economists say Mr. Erdogan needs to cut public spending, including expensive subsidies for gasoline and electricity. Turkey borrowed heavily in recent years on international markets, and now faces a bill of $250 billion a year to finance the debt and the country’s current account, which is also deteriorating. This could force it to seek help from the International Monetary Fund.

But few say they think he will take the necessary measures. “Erdogan must do a surgical operation on the economy,” Mr. Gurses, the Hurriyet correspondent, said. “I don’t think he will be able to do it since municipal elections are coming in March 2019, but Turkey cannot sustain the situation any longer.”

“The Turkish economy cannot stay on hold,” he added.

In light of the growing economic gloom, it would seemingly behoove Mr. Erdogan to moderate his foreign policy, dialing back the anti-Western policies and language. But he comes across as a prideful man and seems reluctant to back down, especially now that he is relying to some extent on the Nationalist Movement Party, or M.H.P., which preserved Mr. Erdogan’s majority in the Parliament.

The leader of that party, Devlet Bahceli, has made it clear that he will demand concessions for his support, and that he will push an agenda that is anti-Syrian, anti-Kurd and anti-Western, at least rhetorically. He has indicated he would not agree to Mr. Erdogan reaching out to any of the opposition parties after the election.

According to a post on Twitter by Mr. Unluhisarcikli, the Marshall Fund director, “The weight of M.H.P. not only on domestic but also foreign policy will likely increase in the upcoming period, which is not a good sign for Turkey trans-Atlantic relations.”

Mr. Bahceli’s party is strongly opposed to the presence of over three million Syrian refugees in Turkey, and Mr. Bahceli has said he will push for policies to make them return home. Mr. Bahceli has also supported further operations against Kurdish militants inside Turkey and in neighboring Iraq and Syria.

On that issue, Mr. Erdogan promised in his victory speech that he would act decisively against terrorist organizations and work toward liberating more Syrian land from Kurdish militants so that Syrian refugees in Turkey could return home.

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Devlet Bahceli, leader of Turkey’s Nationalist Movement Party, has made it clear that he will demand concessions in return for supporting Mr. Erdogan.CreditAdem Altan/Agence France-Presse — Getty Images

That is likely to lead to more demands from Turkey for the United States to end its cooperation with Kurdish militias in Syria that it has been using in the fight against the Islamic State.

And it bodes ill for the Kurdish minority in Turkey. Even as the pro-Kurdish People’s Democratic Party won representation in the Parliament, crossing the 10 percent threshold, nine party members from the last Parliament remain in jail along with dozens of local political officials and student activists.

For now, Turkey’s Western allies seem prepared to give Mr. Erdogan the benefit of the doubt. Going into the NATO summit next month, “at least there will be clarity about the political situation in Turkey,” said Amanda Sloat, who dealt with the country for the State Department during the Obama administration.

Mr. Erdogan’s warming relations with President Vladimir V. Putin of Russia remain a potential point of contention, particularly the negotiations with Russia over the S-400 air defense system, problematic for a NATO member.

But the Trump administration will not regard the sale as complete until it “physically takes place,” Ms. Sloat said, and the Turks emphasize that they are also negotiating with an Italian-French military consortium.

The NATO secretary general, Jens Stoltenberg, has already congratulated Mr. Erdogan on his victory, and Ms. Sloat said she expected Washington quickly to follow suit.

Mr. Erdogan’s drift toward authoritarianism so strained relations with Europe that he was not welcomed in any European country to campaign among Turkish expatriates, except in Bosnia. And the process for Turkey to become a member of the European Union is at a standstill.

Nevertheless, Sweden’s foreign minister, Margot Wallstrom, said that while the state of Turkey’s democracy had to improve, Mr. Erdogan should be given the chance to do that. At a meeting of European Union foreign ministers in Luxembourg on Monday, she also said that the issues with Turkey’s large Kurdish minority and the country’s economic development were “huge challenges.”

Analysts held out the meager hope that despite an unfair campaign, Turks did vote freely and enthusiastically on Sunday. “With a turnout of more than 90 percent, and the very high mobilization of the opposition, Turkish society still holds its dynamism,” Mr. Unluhisarcikli said. “It gives hope for the future.”