The devastating earthquake in Turkey comes at a critical time for the country’s future

The lives of millions of people in Turkey and Syria were changed forever on Monday as two back-to-back earthquakes sent shock waves hundreds of miles away.

Nine hours apart and measuring a magnitude of 7.8 in Turkey and 7.5 in Syria on the Richter scale, the quakes were the region’s strongest in nearly a century.

As of this writing, the death toll from the earthquakes exceeds 12,000, with many still missing and seriously injured. The World Health Organization put the number of people affected by the disaster at 23 million. At least 6,000 buildings collapsed, many with residents still inside. Rescue efforts continue to be the top priority, with some 25,000 deployed in Turkey and thousands more sent from abroad – but a severe winter storm is now threatening the lives of survivors and those still trapped under the rubble.

Syria, ravaged by 12 years of war and terrorism, is the least prepared to face such a crisis. Its infrastructure is severely depleted and the country remains under Western sanctions. Thousands of people in the affected areas are already refugees or internally displaced persons.

With the dust from the disaster still settling, regional analysts are looking into the longer-term ripple effect the disaster could have on Turkey, a country with a population of 85 million. was already mired in economic problems – and whose military, economics, and politics have a major impact far beyond its borders.

This year will serve as a critical inflection point for Turkey, as a presidential election approaches on May 14. The outcome of this election – whether current President Recep Tayyip Erdogan stays in power or not – has massive consequences for Turkey’s population, economy and currency. , and democracy.

Erdogan’s response to the disaster – and potential calls for accountability for why so many buildings were not designed enough to withstand such tremors – will now play a major role in his political future.

“If the rescue effort is mismanaged and people are frustrated, there is a backlash,” Mike Harris, founder of Cribstone Strategic Macro, told CNBC on Tuesday. “And the other issue, of course, is the buildings and those that have been destroyed. As long as they were built to the new codes and the authorities haven’t imposed any regulations, there could be a serious backlash for Erdogan. So Erdogan lost control of the narrative.”

Erdogan has called for elections in early May amid a national cost-of-living crisis, with local inflation above 57%, up from over 80% between August and November. Several analysts say the move reveals Erdogan’s urgency to secure another term in office before his controversial economic policies backfire.

Harris described that the president had created “this weird situation where inflation is running at 80%, but he has to keep the currency stable between now and the election.”

Through some very unorthodox policies, Erdogan has “found a very creative way, a very expensive way, to de-dollarize the economy, basically,” he said, giving examples like allowing the Turks to keep their bank deposits at an interest rate of 13%, then promising to cover their losses, if the currency falls further.

Harris boldly predicted, “Actually the currency has to crash if he wins because there will be no confidence and he has created this artificial scenario that cannot be sustained for an extended period of time.”

Moreover, Erdogan’s pre-election fiscal promises – populist measures like raising wages and lowering the retirement age – may be impossible now, as more public funds will have to be spent on reconstruction. of entire cities.

Turkey’s economic decline has been fueled by a combination of high global energy prices, the Covid-19 pandemic and the war in Ukraine, and, primarily, by Erdogan-led economic policies that have removed interest rates despite soaring inflation, sending the Turkish lira to a record low against the dollar. Turkey’s foreign exchange reserves have fallen sharply in recent years and Ankara’s current account deficit has exploded.

The Turkish lira lost almost 30% of its value against the dollar last year, which seriously damaged the purchasing power of Turks and the popularity of Erdogan.

The Turkish opposition parties have not yet presented their candidate. The most powerful potential challenger, Istanbul Mayor Ekrem Imamoglu, was arrested and hit with a political ban in December on charges his allies say are politically motivated and used solely to bar him from running for president.

In recent years, investors have withdrawn their money from Turkey in droves. One of the leading emerging market gurus, Mark Mobius of Mobius Capital Partners LLP, remains optimistic despite the earthquake and economic troubles.

“When it comes to investing in Turkey, we always think it’s a viable place to invest,” Mobius said. “In fact, we have investments there. The reason is that the Turks are so flexible, so able to adapt to all these disasters and problems… even with high inflation than with a very Turkish lira. weak… So it doesn’t work”. It doesn’t scare us at all to invest in Turkey.”

Mobius noted the glaring problem of preparing for the earthquake in Turkey, which could soon come to haunt Erdogan’s electoral chances.

“That’s one of the big issues, the building codes in some of these areas are not up to par,” he said.

Internationally, Turkey’s future affects the war in Ukraine, given Erdogan’s role as a mediator between Ukraine and Russia. Turkey is the main NATO member that still opposes Sweden and Finland joining the powerful defense alliance.

Ankara is also negotiating the Black Sea Grain Initiative between Ukraine and Russia, which sees vital grain supplies exported from Ukraine to the rest of the world despite a Russian naval blockade on Ukrainian seaports. Black.

Erdogan’s response to the earthquakes – and subsequent election results – will impact all of these.

Turkey will get some relief from Western pressure on its position in NATO following the earthquakes, but not for long, said Sinan Ulgen, president of the Istanbul-based Center for Economics and Foreign Policy.

“It will be temporary,” Ulgen said. “Turkey will consider a few weeks of reprieve, but after that it will be more of a back to business on the foreign policy side.”

For now, Western allies and countries around the world are sending aid and rescue teams to help Turkey’s disaster relief efforts. Ankara will have to deploy massive public spending to support people in need and rebuild all earthquake-affected areas.

“The positive side is that Turkey has fiscal space,” Ulgen said. Turkey has a public debt to GDP ratio of around 34%, which is very low compared to the United States and Europe. According to him, this “means that Turkey has room for maneuver for budgetary expenditure, even if it means a significant increase in the public debt ratio”.

As a large country, Turkey has significant capacity to handle natural emergencies. Still, Ulgen added, “whatever capacity is available, it would unfortunately be insufficient to respond to this type of disaster.”