Turkey 2023 presidential election scenario analysis update

Summary

General elections in Turkey are set to take place on May 14, and with the first round of elections this weekend, we updated election our scenario analysis. Typically, we would note that the outcome of the presidential election is not as important as parliament/congressional elections; however, with President Erdogan controlling the overarching policy direction for Turkey—especially economic and monetary policy—the presidential election is more consequential than Turkish parliamentary elections. As far as our views, we continue to believe President Erdogan will retain office, and our base case forecast for the Turkish lira includes President Erdogan winning the election via second round runoff. Despite the challenges associated with Turkey's economy and the new challenges associated with the earthquakes, we believe Erdogan is still popular enough to receive a sufficient amount of votes, or is able to influence voting intentions or challenge results as a way to win re-election. We place a 50%-55% probability Erdogan retains office. However, the likelihood of this scenario unfolding has fallen since we published our original scenario analysis, and the probability of regime change has increased. At the heart of the regime change scenario are unsustainable economic conditions, although an underwhelming and inadequate response to the earthquakes is contributing meaningfully to the opposition Nation Alliance gathering momentum over the last few months. In addition, the Nation Alliance has demonstrated further unity by putting forward a common candidate in Kemal Kilicdaroglu and rallying around technocratic policy frameworks. We now assign a 45%-50% likelihood of regime change materializing.

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