First Take on Turkish Elections Results

man voting on elections in turkey front of flag

Emerging Markets Strategist Ilan Solot provides an overview of the Turkish election results and their ramifications.

Today’s results from the parliamentary election in Turkey suggest that change is on the way. Three things are clear: 

(1) Erdogan’s ruling AKP did not get the 276 seats (simple majority) needed to form a government, hence lost a lot of power.

(2) The Kurdish party HDP has made it over the 10% threshold and consolidated itself as a major political player.

(3) The chances of Erdogan having a referendum to change the political system to a presidential one (a willing coalition of 330 seats needed) is extremely slim, at least in the near-term. So what happens now? With all the obvious caveats, the situation looks a bit like what would have happened in Britain if the polls had been correct: a period of very difficult coalition building negotiations and a hung parliament. The likelihood of an early election in 45 days is very high.

Just a simple recap of the players and results before we continue:

AKP – Ruling party led by Erdogan (258 seats)

CHP – Main opposition party (132 seats)

MHP – Nationalist party, they don’t like Erdogan but dislike the Kurds even more (81 seats)

HDP – The political arm of the Kurdish moment in which the PKK is the military arm, akin to the Sinn Fein and IRA in Ireland. (79 seats)

In our view, the results have different implications for Turkey, and Turkish assets, depending on the time frame.

Short term: high uncertainty. The coalition building process will be very complicated. For one, all three other major parties have vowed not to form a coalition with the AKP. Campaigning aside, the AKP could have a coalition with the MHP or the HDP and get over 330 votes, but this will come at a high cost. Even if there is an agreement, we doubt either party would support the Erdogan’s referendum since it would transfer power from the parliament to the AKP’s dominated presidency.

Medium term: risk of a more aggressive AKP. If no coalition is formed and early elections are called, there is a chance that Erdogan doubles down and goes on the offensive. This could mean anything, from deepening the heterodox economic policy to a dirty campaign.

Long term, scenario 1: reduction of Erdogan’s power (positive). Turkey has become a political pressure cooker. The results of these elections should help let some steam out and direct social tensions to the political process instead of the streets (Gezi Park protests of 2013). Whatever the case, it seems as if the AKP is losing a lot of power.

Long term, scenario 2: Erdogan finds a way to consolidate power again (negative). This could happen through early elections results, or somehow flexing its authoritarian muscles. Or it could happen via AKP striking a bargain with a coalition partner where one group (Kurds probably) will get favored (HDP) or discriminated against (MHP) in exchange for support. This could exacerbate the social tensions and further polarize the political outlook.