|FORECASTS OF RISK TO INTERNATIONAL BUSINESS|
|KEY ECONOMIC FORECASTS|
Election Result Points to High Risk of Protracted Instability
Ahead of the parliamentary elections held on June 7, President Recep Tayyip Erdoğan called upon Turkey’s voters to deliver a 400-seat supermajority for his Justice and Development Party (AKP), in furtherance of his goal of revising the constitution to strengthen the powers of the presidency. Instead, the AKP lost the outright majority it has enjoyed since first coming to power in 2001, taking just 258 seats in the 550-member Grand National Assembly (GNA). The result all but guarantees several weeks of intense uncertainty as the AKP enters into negotiations in hopes of forming a majority coalition, and the instability could last months (or even longer) if it fails to do so.
The setback for the AKP is largely the result of strong support for the People’s Democratic Party (HDP), whose leader, Selahattin Demirtaş, took a big gamble by contesting the elections under the party’s banner, rather than running HDP candidates as independents, a strategy that enabled the party to win more than two dozen seats in 2011. If the HDP had failed to win the minimum 10% of the vote required to qualify for representation in the GNA, the party would have won no seats. However, by taking more than 13% of the vote, the HDP claimed 80 seats, which otherwise would have been distributed among the AKP, the Republican People’s Party (CHP), and the Nationalist Movement Party (MHP), the only other parties to clear the threshold.
Ahmet Davutoğlu, who replaced Erdoğan as leader of the AKP shortly after the presidential election in August 2014, resigned on June 9. The AKP must now choose a replacement, who will have 45 days to either form a majority coalition or win confirmation of a minority administration. In the event that neither is a viable option when time runs out, the president will have no choice but to call another election.
|SUMMARY OF 18-MONTH FORECAST|
REGIMES & PROBABILITIES
|Operations||Moderate||Same||SLIGHTLY MORE||SLIGHTLY MORE|
|Tariffs||Moderate||SLIGHTLY LESS||Same||SLIGHTLY LESS|
|Payment Delays||Moderate||Same||SLIGHTLY MORE||Same|
|Labor Costs||Low||SLIGHTLY MORE||Same||Same|
|Foreign Debt||Moderate||SLIGHTLY MORE||MORE||SLIGHTLY MORE|
|SUMMARY OF FIVE-YEAR FORECAST|
REGIMES & PROBABILITIES
|Investment||Moderate||SLIGHTLY LESS||SLIGHTLY LESS||SLIGHTLY MORE|
|Trade||Moderate||SLIGHTLY LESS||SLIGHTLY LESS||Same|
|International||Very High||SLIGHTLY LESS||Same||Same|
|* When present, indicates forecast of a new regime|
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