Turkey elections, another inconclusive outcome?

Following fruitless efforts to form a coalition government following the 7 June parliamentary elections, Turkey is heading for another round of elections on Sunday. The political stalemate is prompted by the fact that the Justice and Development Party (AKP) lost its majority in Parliament in the June election for the first time since the party's creation in 2002. Attempts to form a coalition between the AKP and the main opposition party, the Republican People's Party, CHP, ran aground on a disagreement over how long the coalition should be in place. The CHP wanted a four year period while the AKP wanted a shorter timeframe.

The campaign leading up to Sunday's election has been marred by political and religious violence. Following the June election, the worst violence in years broke out in Turkey between Kurdish militants and government authorities. Turkey suffered its worst terrorist attack on 10 October, when 102 people were killed following a bomb explosion during a peace demonstration. The attack has prompted mutual criticism between the different parties, worsening the political climate in Turkey.

Despite the troubles for the Turkish economy, economic issues have taken a less prominent role. The critical issue for the Turkish economy is reinvigorating economic growth through structural reforms amid a slowing economy as a debt-fuelled boom comes to an end. During the campaign the different political parties have been outbidding each other with populist fiscal promises, calling for higher wages and pensions.

Most polls predict another hung parliament following Sunday's election. According to the most recent polls, AKP actually stands to lose further compared with the June election, obtaining only 251-254 seats versus the 258 seats won in the June election. The number of seats would be far below the 276 majority threshold in parliament. Hence, if the polls are right, an outright AKP majority or minority-led government is quite unlikely. The main opposition party, CHP, is predicted to win additional seats compared to the June election.

"We think a coalition between the AKP and CHP with a strong economic team would be regarded relatively favourably by investors. The political parties will be under pressure to break the political stalemate and form a coalition. The latest indications from the two main political powers, AKP and CHP, suggest increased willingness to compromise and we see that as the most plausible coalition outcome", says Danske Bank.