AXA - Turkey: sliding in the political vortex

Key points

- Turkey’s 7 June 2015 general election will end the long election period that Turkey entered in 2014 with local and presidential elections.

- The general election will not be an easy ride for the incumbent AKP party as its public support wanes after more than a decade in power.

- The Kurdish HDP party is likely to pass the 10% electoral threshold, enter the Parliament and retain its seats. As a result, no party would have an outright parliamentary majority.

- Current polling puts support for the AKP in the 40% to 47% range, and above the 10% for the HDP.

- Political risk would remain even after the June elections due to the envisaged constitutional changes and likely reshuffle of the successful and market-friendly economic team.

- Expected monetary policy normalisation in the US and mounting political risk will weigh on the Turkish lira and the inflation outlook. Rating agencies will likely remain vigilant.