Early Days of Erdogan’s Re-election: A Period of Action for Turkey

Economic growth Turkey

President Recep Tayyip Erdogan's first two weeks in office since his late May 2023 re-election have been characterised by vigorous diplomatic and economic action. In his fourth term as the President of Turkey, Erdogan has quickly pivoted to address both international relations and domestic concerns, highlighting his ambition to secure Turkey's place on the global stage while concurrently combatting the economic challenges at home.

In the international sphere, the re-elected President has swiftly moved to cement various deals with influential players such as UAE, Qatar, Saudi Arabia, China, and Russia. These agreements are part of Erdogan's grand design to further extend Turkey's geopolitical influence, particularly in the Middle East and the East. Planned visits to Northern Cyprus and Azerbaijan indicate a robust strategy to foster closer relations with regional allies. Furthermore, the participation of numerous delegates from the Gulf Cooperation Council and NATO at his inauguration underscores the shared interest among these entities in fortifying relations with Turkey.

On the domestic front, Erdogan has turned his focus to the Turkish economy, which has been grappling with a depreciating lira and persistent inflation. In a significant move, he appointed a new Central Bank Chief and Economy Minister. Both appointees have garnered international praise for their perceived capacity to counteract Erdogan’s previous unorthodox economic policies that have been implicated in the country's inflation woes.

As far as the Turkish real estate sector is concerned, despite a projected sluggishness for the remainder of the fiscal year 2023, optimism abounds for a potential resurgence. Property Turkey anticipates that as the Erdogan administration re-stabilises the economy, the knock-on effects will culminate in a buoyant real estate market starting from early 2024. As such, these initial weeks of Erdogan's renewed tenure hold promising signs of a proactive approach to deal making both at home and abroad.

Foreign Relation Investment Deals

In the aftermath of his successful re-election in May 2023, President Recep Tayyip Erdogan has made a series of bold investment and foreign relations moves that have signalled Turkey's intent to diversify and strengthen its global standing. These include significant deals with the UAE, Qatar, Saudi Arabia, Russia, and China, amounting to an impressive $60 billion. These deals highlight a pivot in Turkey's strategy to increase bilateral trade, stimulate the economy, build infrastructure, and secure its defense capabilities.

In a landmark agreement with the UAE, signed in June 2023, both nations committed to increasing their bilateral trade to a staggering $40 billion over the next five years. This agreement showcases the interest of the Gulf Cooperation Council (GCC) states to deepen economic ties with Turkey, reinforcing Erdogan's commitment to diversify Turkey's foreign relations.

Furthering this diversification, a $10 billion deal was inked with Qatar. The agreement will see a significant influx of Qatari investment into Turkey's economy over the next half-decade, specifically channeled towards infrastructure projects, energy initiatives, and the development of tourism-related ventures. The deal acts as an emblem of the strengthening bond between the two nations, and the potential for symbiotic growth.

In a bid to ensure energy security and create an infrastructure marvel, a $5 billion deal was signed with Saudi Arabia to construct a natural gas pipeline that would stretch 1,800 kilometres from Saudi Arabia to Turkey. Meanwhile, Turkey’s defense capabilities will be significantly augmented through a $3 billion deal with Russia to purchase 20 Su-35 fighter jets.

The infrastructure emphasis continued with a $2 billion agreement with China for the construction of a high-speed rail line connecting Istanbul and Ankara. Spanning 550 kilometres, this project underscores China's deepening influence in Turkey's infrastructure development.

Collectively, these deals not only represent a major shift in Turkey's foreign policy from its historical alignment with the West but also demonstrate its increasingly independent stance and strategic diversification. This new trajectory holds significant implications for Gulf Arab states, as deeper ties with Turkey align with their economic diversification agendas. Turkish companies stand poised to contribute significantly to these GCC states' transition away from hydrocarbon dependence, across sectors ranging from entertainment and tourism to food production.

However, these billion-dollar deals have been met with mixed reactions, both domestically and internationally. While some hail these agreements as a testament to Turkey's burgeoning economic and political power, critics view them as a sign of the country's increasing isolation from the West. The true long-term impact of these deals remains to be seen, but there's no doubt that President Erdogan's first month in office after re-election has been marked by bold moves that have the potential to reshape Turkey's geopolitical and economic landscape.

Cabinet Appointments

In a significant move to wrestle control of surging inflation, Turkish President Recep Tayyip Erdogan has unveiled a new economic team following his recent re-election. His new appointments to key economic posts – a new central bank chief and a new finance and treasury minister – are seen as a potential shift away from his unorthodox financial policies that have contributed to the nation's inflation woes.

The appointment of Hafize Gaye Erkan as the new Central Bank Chief has been hailed by international observers. Erkan, a Turkish-American dual citizen, brings a wealth of experience from her distinguished academic background and her professional journey. A Princeton graduate in financial engineering and operations research, Erkan spent a decade at Goldman Sachs and served as the co-CEO of the now-defunct First Republic Bank for eight years before leaving in December 2021. Her appointment signals a potential departure from the unconventional approach of slashing interest rates in the face of high inflation - a policy that saw rates cut from 19% to 8.5% over the past two years despite inflation soaring to 85.5%.

Alongside Erkan, Erdogan has appointed Mehmet Simsek as the new Finance and Treasury Minister. Simsek, a widely respected economist, is no stranger to the corridors of power, having previously served as Erdogan’s deputy prime minister and finance minister. He also brings international experience from his seven-year tenure at investment firm Merrill Lynch, a brief stint with UBS on Wall Street, and as the chief economist at the US embassy in Ankara. His appointment was broadly anticipated and has been seen as a reassuring move for markets as the Turkish lira hit a new low during Erdogan’s inauguration.

These appointments could symbolise a significant shift in Turkish economic policy, indicating that Erdogan might be ready to loosen his grip over the central bank and potentially move away from his belief that interest rates cause, rather than curb, inflation. If these appointments indicate a more conventional approach to monetary policy, it could signal a fresh chapter for the Turkish economy, one marked by greater stability and potential for growth.

The Organization of Turkic States (OTS)

The Organization of Turkic States (OTS), formerly known as the Turkic Council, has signed a founding agreement to establish a fund aimed at enhancing economic integration among its member countries. The announcement was made by Turkish President Recep Tayyip Erdogan during an extraordinary summit held in Ankara. The newly formed Turkic Investment Fund is viewed as a concrete achievement of the summit, and Istanbul has been chosen as its host city. The OTS, an international organization comprising independent Turkic nations including Turkey, Azerbaijan, Kazakhstan, Kyrgyzstan, and Uzbekistan, seeks to foster stronger relations and unity among its members. EU state Hungary, Turkmenistan, and the Turkish Republic of Northern Cyprus (TRNC) have observer status. 

The extraordinary summit focused on the theme of "Disaster-Emergency Management and Humanitarian Assistance," during which leaders discussed a multilateral cooperation and coordination mechanism to combat disasters. This focus came in the aftermath of severe earthquakes that recently hit southeastern Turkey, causing widespread devastation and resulting in thousands of casualties. Acknowledging the solidarity shown by the Turkic states during this time of crisis, Erdogan emphasised the need to strengthen the capabilities of the OTS to better handle current and future challenges.

Real Estate Perspective

In conclusion, the indicators of revival in Turkey's real estate market paint a picture of optimism and growth. While there have been challenges, we are now seeing signs of pent-up demand, ready to flow into our thriving cities. As a real estate experts, we hold steadfast in our belief that the current conditions are transient and, in fact, create unique investment opportunities.

The narrative of Turkey's property market, in our view, is not one of contraction, but of resilience and potential. It is an unfolding story of the enduring attractiveness of our cities, their capabilities to recover from adversities, and their ability to continue to draw interest from around the globe. There is, therefore, an impending period of energetic activity in the horizon for the Turkish real estate market.

For those ready to seize the opportunities this brings, we say: be patient, the market is poised to open up, and business will pour in. This is a time for strategic positioning, planning, and readiness to work hard when the tide turns. Because when it does - and it will - it will bring a surge of opportunities that rewards the prepared, the patient, and the persevering. The Turkish real estate market is on the cusp of a new era, and we are excited to be a part of it.

“Life comes in waves of opportunities. Luck favours the prepared.” - Cameron Deggin



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