As Turkey’s May 14 presidential and parliamentary elections approach, the big question is how much of a difference the outcome will actually make. What is clear, at least from the perspective of Western investors, is the need for change. Recep Tayyip Erdogan’s government, in power since 2003, has undermined Turkey’s economy and democracy through an unorthodox monetary policy and the politicisation of the judicial system.

Under his rule, Turkey has also become an increasingly unpredictable ally to the West and Nato, as its posture in the international arena has wavered periodically. While an electoral victory for his opponent, Kemal Kilicdaroglu, would be seen as a positive outcome, any substantive reform he seeks is likely to face significant challenges, at least in the short term.

A victory for Erdogan and his ruling Justice and Development Party (AKP) would mean much of the same. Since engineering a switch from a parliamentary system of government to an executive presidency in 2018 – following an abortive coup two years before – Erdogan has become increasingly authoritarian. His controversial intervention in monetary policy has led to ruinously high inflation – currently towards 50%, though the unofficial rate is much higher.

A reluctance to raise interest rates to bring inflation down has left citizens poorer and companies financially-stretched. The tumbling value of the Turkish lira, meanwhile, has put further strain on family and commercial budgets, a glaring own goal for an import-dependent country. Anyone who disagrees with Erdogan’s decision-making has been removed, including central bank governors and finance ministers. So much so, that he has ended up being surrounded by yes-men, who dare not dissent, even as foreign investors have headed for the door.

It’s a similar story with the judiciary. Thousands of judges and prosecutors have been purged and replaced by inexperienced Erdogan loyalists who fast-track cases to limit adverse press coverage.  The hollowing out of the judicial system, critics say, has undermined due process and severely curtailed freedom of speech. Those who challenge the government have often found themselves prosecuted on trumped-up charges.

And there’s little to suggest that if Erdogan is re-elected, his approach to monetary and foreign policy will change. Recent developments, such as his hardline approach to Sweden’s accession to Nato and the politically-motivated prosecution of Istanbul mayor and one-time potential presidential candidate Ekrem Imamoglu indicate that he has not reevaluated his approach to governance.

Erdogan’s main rival Kemal Kilicdaroglu, who represents a broad opposition grouping called the Nation Alliance, appears intent on taking Turkey in a more investor-friendly direction. He has promised to restore the independence of the central bank and the judiciary as part of a shift towards greater democracy, central to which would be the restoration of a parliamentary system of government. A Kilicdaroglu victory would clearly encourage those who feel Turkey needs to move in a more democratic and financially orthodox direction, but there are doubts about just how much he could realistically achieve.

But victory for Kilicdaroglu and the Nation Alliance may not be the quick fix to Turkey’s structural problems that Western investors hope it will. Erdogan’s AKP and its allies will likely remain a dominant force in parliament and probably look to block progressive legislation aimed at reversing their leader’s policies. And there’s no guarantee that Kilicdaroglu will be able to rely on his coalition, which is quite fractious, made up as it is of disparate political forces. It includes nationalists, Islamists and liberals – with not much in common other than a desire to remove Erdogan from office. Once in government, this unwieldy alliance may begin to splinter as conflicting agendas emerge.

Taking Turkey back to a parliamentary system of government will not be straightforward. Not only would the coalition need to win over half of the 600 parliamentary seats, but it would have to initiate and win a referendum to reverse the constitutional amendment which made it possible for the country to move to an executive presidency. In fact, by some estimates, the opposition parties forming the Nation Alliance would have to win up to five separate rounds of elections (including a national referendum) to achieve this reversal. It would take an equally long time to restore judicial independence, not least because the Council of Judges and Prosecutors – responsible for appointing and removing members of the judiciary – needs to first be depoliticised to enable meritocratic appointments across the country.

While reverting back to a parliamentary system may be the opposition’s most complex task, there are two key areas that may see relatively quick change under a Kilicdaroglu presidency: foreign and monetary policy. Kilicdaroglu has already signalled his intention to repair the somewhat frayed relationship Turkey has with the West and Nato, alluding to closer defence cooperation with the US. And on monetary policy, the Turkish president has the executive prerogative to appoint a new central bank governor.

A Kilicdaroglu victory would certainly bring some quick wins for Turkey. A stronger and more cordial relationship with the West could also restore foreign investors’ faith in Turkey, especially if combined with more stable monetary policy. But paradoxically, if a victorious Kilicdaroglu wants to effect deeper domestic reform, he may have to utilise presidential powers, the very levers he has pledged to loosen.

Risk Advisory's Europe practice specialises in conducting integrity-focused due diligence and strategic market intelligence across the region. We have expertise in advising clients on the risks of doing business in Turkey, focusing in particular on the potential risks arising from perceived proximity to the AKP government and the Erdogan administration.