Turkey municipal elections:He who laughs last, laughs best

The recent local elections held in Turkey on 31 March were supposed to be rather insignificant but have transformed the political landscape of the country. Indeed, the ruling Justice and Development Party (AKP) unexpectedly los t almost 10pp to the opposition Republican People’s Party (CHP) and some conservative parties, previously aligned with the incumbent. That surprising defeat, especially in major cities (such as Istanbul, Ankara, and Izmir), indicate a significant change in public sentiment regarding the handling by the government of the current economic challenges . The latter remain numerous with the past overheating (thanks to the nonorthodox views of the President on the monetary policy and inflation) still feeding into the hyperinflation . And even the key interest rate at 50% in nominal terms has not yet tamed that dynamic as it remains negative in real terms . The markets’ reaction has been muted at first until President Recep Tayyip Erdoğan reassured on the continuity in the government’s orthodox approach to the economic policy post-elections. As a result, Turkish lira gained 3.5% against US dollar in the first days of April after a long trend of depreciation with -37% in 2023 (vs. USD).