How Turkey's economic, inflation policy hinges on upcoming local elections

ISTANBUL — Turkey’s March 31 local polls are likely to mark a junction in Ankara’s economic policy, but which way it goes will depend largely on the extent to which the election results satisfy President Recep Tayyip Erdogan.

The presidential and parliamentary elections of May 2023 secured Erdogan and his Justice and Development Party another term in office. But Turkey’s new economic management team appointed after those elections has been unable to shift into a full austerity mode due to the upcoming March 31 local elections. Above all, Erdogan and his Justice and Development Party are eager to recapture the local administration of Istanbul, Turkey’s largest city and economic hub, which they lost to the main opposition Republican People's Party in 2019 along with the capital Ankara and other major urban centers.

Erdogan has long shown that he places political goals above everything else. His economic policies, too, have been driven by political objectives, even when they come at a price. The high inflation that currently haunts the Turkish economy is largely the outcome of Erdogan’s controversial low-rate policy that he stubbornly pursued for several years until last year’s polls. Following his reelection, Erdogan appointed Mehmet Simsek — a member of his previous governments who enjoys credibility at home and abroad — as treasury and finance minister and tasked him with Turkey's economic recovery. He also changed the management of the Central Bank. 

What changed?