A year has passed since Turkey’s government made an important shift in economic policy, followed by additional orthodox monetary steps, and the encouraging results may offer President Recep Tayyip Erdogan a path to retain the presidency for years to come. The issue is whether he will ride on a wave of improving economic indicators thanks to modest, short-term policy modifications to seek long-term, constitutional changes that would allow him to remain in power beyond 2028.

In June 2023, after Turkey had suffered five years of extreme inflation, the loss of foreign investment and widening fiscal deficits, a newly appointed minister of treasury and finance set out on a course of textbook policy while the central bank kept raising interest rates. The move has yielded positive results. Given the government’s history, however, one question still looms large: Is this policy shift tactical or strategic?

The answer partially hinges on the sustainability of the current policy. It started with foreign diplomats making pronouncements a year ago and now continues with portfolio managers adjusting their holdings. The March 2024 election results, in which the opposition made gains at the expense of support for Mr. Erdogan, further strengthened the policy framework. It may have marked the point of no return from his previous economic moves.

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This note was published in GIS on August 2024.