Erdogan Suffers Historic Loss in Turkey Municipal Elections

(Bloomberg) -- Turkey’s Recep Tayyip Erdogan suffered an unprecedented defeat at the ballot box against the main opposition party amid rampant inflation and the highest borrowing costs since the president swept to power more than two decades ago.

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• Erdogan Suffers Historic Loss in Turkey Municipal Elections

Turkey’s lira weakened in early trading on Monday after Erdogan’s AK Party fell behind the main opposition Republican People’s Party, known as CHP, in Sunday’s municipal elections for the first time ever, according to early results published by state broadcaster TRT.

Support for AKP stood at 35.5%, while CHP was leading the race with 37.7%, with about 99.8% of the ballots counted, TRT reported.

Poll results show voters turned against the ruling party in much of the country, but the change was more dramatic in urban areas. That was mainly due to persistently high inflation even after Erdogan allowed the central bank to raise the nation’s key interest rate to 50%, the highest level since the ruling party first came to power in 2002. While higher lending costs resulted in a slump in consumer sentiment, they have yet to reverse the trajectory of price increases, which are running at an annual rate of just under 70%.

“Voters appear to have punished his party and candidates for economic hardships at the municipal elections,” Emre Peker, Europe director for Eurasia Group, said of the president. “Erdogan is no longer immune to voter concerns over the economy, which he most recently sidestepped in May 2023 to secure reelection.”

AKP was set to win the mayor’s seat in 24 cities, down from 39 in 2019. CHP was leading the race in 35 provinces, compared with 21 in the last election, TRT reported.

Erdogan acknowledged defeat in a speech to his supporters in front of the AKP headquarters in Ankara, pledging “self-criticism” and “respect” for the outcome.

“The March 31 elections mark a turning point. We weren’t able to get the results in local elections that we were hoping for,” Erdogan said, promising to recover support by the next presidential vote in 2028.

Erdogan’s Nemesis

Sunday’s results are set to boost the popularity of Ekrem Imamoglu, as the opposition mayor of Istanbul declared victory with more than 11-percentage-point margin, citing early results. Pre-election polls had indicated that Erdogan’s AKP and the opposition were neck-and-neck race in the country’s largest city.

The vote is seen as a broader battle between Turkey’s two most prominent political adversaries. Imamoglu gained control of Istanbul in 2019, bringing to an end Erdogan’s 25-year-long control of the city. His party CHP also won the capital city Ankara from Erdogan’s party in the same elections in a stinging defeat for Turkey’s president.

Even after his second Istanbul victory in a row, Imamoglu has another battle to fight. He is accused of insulting members of the Supreme Election Council, which could result in his being banned from political office.

At stake in Istanbul is control of a city of almost 16 million people with a $6.6 billion annual budget.

Social aid payments from municipal budgets are critical to voters hit by Turkey’s cost-of-living crisis. How those funds are allocated are decided at municipal councils, making dominance there is just as important as winning the mayor’s seat.

Islamist Defectors

Some of the decline in the ruling AKP’s votes was due to pro-Islamic New Welfare Party’s decision to field its own candidates, bringing the alliance between the two to an end. Mayors running under the party’s banner got over 6% of the votes, according to early results.

New Welfare severely criticized Erdogan’s economic policies and his government’s refusal to stop trade with Israel despite the war in Gaza.

Even so, the election results are unlikely to put a distance between Erdogan and his team of top economic policymakers led by Finance Minister Mehmet Simsek, according to Wolfango Piccoli, the co-president of consulting firm Teneo.

“No significant policy shift is expected on the economic policy-making,” he said.

The main risk to Simsek’s policy program, which stipulates public budget discipline and high interest rates to tame inflation, is that Erdogan will find it difficult not to raise the minimum wage and pensioner salaries during the second half of 2024, Piccoli said.

The president said he wouldn’t let the election results hamper his economic plans.

“We have implemented our medium-term program with determination. We have stayed away from populist steps that would put a burden on our country, nation and future generations,” Erdogan said. “We will begin to see the positive results of our economic program, led by improvements in inflation.”

--With assistance from Tugce Ozsoy, Baris Balci and Virginia Van Natta.

(Updates with latest numbers throughout, video, pre-election polls for Istanbul in ninth paragraph.)

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