Turkey’s presidential election is to go for a second-round run-off after official results showed President Recep Tayyip Erdogan confounding the pollsters and the pundits by holding off the challenge of opposition unity candidate Kemal Kilicdaroglu, though not not quite moving beyond the 50% threshold that would have delivered him an outright win.

Many observers were convinced that, given the poor performance of the Turkish economy, Erdogan’s 20-year reign would be declared over.

However, the Supreme Election Board (YSK) said Erdogan picked up 49.51% of the vote, ahead of his rival who was on 44.88%. Ultra-nationalist third candidate Sinan Ogan took 5.2% of the vote.

Pundits predict that Ogan’s divisive politics would make it difficult for him to strike a deal to endorse Kilicdaroglu in the election decider, meaning Ogan's voters might put Erdogan over the line. Turnout was given as 87.2%.

Adding to the opposition’s woes, officials looked set to confirm Erdogan’s alliance had won a majority in the parliamentary vote. That could give Erdogan an advantage in the presidential run-off, which is to take place on May 28, with some voters turned off voting for Kilicdaroglu by the prospect of a messy division of power.

If strongman Erdogan does prevail in the second round, his victory will revive anxieties among his critics that Turkey’s days as a country that has something approaching a functioning democracy are over and done with.

Wolfgang Piccoli at political risk consultancy Teneo said it looked like Erdogan was indeed now well positioned to prevail in the run-off. “His campaign ahead of the runoff vote will be about the threat of a divided government, knowing that most voters in Turkey are traditionally extremely sensitive about political stability issues," Piccoli said. "This will resonate well with the public as the complex challenges that the country is facing requires an effective governing formula.

“Kilicdaroglu’s campaign was about winning in the first round and he failed miserably.”

With results showing he had fallen only a little short of 50%, Erdogan stood on the balcony of his Justice and Development Party (AKP) headquarters in Ankara and told jubilant supporters: “The fact that the election results have not yet been finalised does not diminish the fact that our nation’s choice is clearly in favour of us.”

Kilicdaroglu—who had earlier angrily hit out at officials he claimed were blocking the confirmation of votes in many of his strongholds by issuing repeated demands for recounts—said: "If our nation says second round, we will absolutely win in the second round."

The outcome of the election did not go down well with the markets, which have been hoping for an end to Erdogan’s “unorthodox” boom-and-bust economics that have, for instance, seen the Turkish lira lose 95% of its value against the dollar in the past 15 years and sent inflation rampant.

The lira, down around 5% in the year to date, weakened to 19.70 to the dollar before trimming some of its losses to 19.66, but it was not far off the 19.80 level it hit in early March following the deadly earthquakes that struck Turkey in February.

Turkish bank stocks were also hit hard in early post-election day trade, with the main banking index falling by more than 8%.

Dollar-denominated sovereign bonds issued by Turkey fell sharply by more than seven cents, while the five-year Turkey credit default swap (CDS) spread jumped 114 bp to 606 bp, according to S&P Global Market Intelligence. That was the highest level seen since November 2022.

Richard Briggs, Candriam senior fund manager of emerging market debt, was quoted by Reuters as saying the results were "almost certainly negative for markets" as an Erdogan win could mean a continuation of economic imbalance, unorthodox monetary policy and costly efforts to prop up the lira.