A growing population means the pressure is on for the Ankara government to engineer a higher level of domestic economic growth. One man largely credited for Turkey's economic prosperity in the eyes of investors, Deputy Minister of Economy Ali Babacan will be unable to stand for parliamentary elections next year. And the Prime Minister's economic populism, while stirring to his base of some 40 percent of the Turkish electorate, does fall short when it comes to concrete solutions.
"Turkey had 4 percent growth in the first quarter, but to accommodate new entrants into the work force they need 5 percent. So although 4 percent sounds great for most countries, it's not enough for Turkey," says Friedman.
"To get to that next level of growth, they're going to really need to have some structural reforms and that includes more independence for regulatory agencies, more innovation from Turkish companies and more focus on education. And so far, we've seen Mr. Erdogan focused on continuing a credit-fueled consumption and construction boom. That's just not a sustainable path."
Add to that the political uncertainty surrounding the Prime Minister's bid for the Presidency. Erdogan's plans to consolidate power behind the office of the Presidency and his increasingly authoritarian reaction to criticism, particularly by local media and political opponents, are giving some investors cause for pause.
"We're going to have efforts to rewrite the constitution following the elections which will be a very tough political process," says Friedman.
"There's going to be a lot of political uncertainty and risk coming for turkey over the next year and a half…[but] this economic populism is just electioneering— Erdogan knows his party has really benefited from being the pro-business party for the past ten years and they know that they're continued political success is underpinned by strong an economic performance. "
Once considered a model of political Islam, Erdogan's government is now seen as authoritarian. Ministers regularly speak of political intrigue and conspiracy; the Prime Minister himself has accused political opponents and prosecutors involved in the investigation of corrupt officials in his inner circle of attempting a coup. Erdogan's public outbursts and gaffes over the last 24 months—a series of political blunders that many observers once assumed would put a swift end to his presidential ambitions—have had little impact on his prospects.
"We're going to see a very different presidency than we have seen in the past. Erdogan is going to use these [new powers] to the maximum," says former U.S. Ambassador to Turkey James Jeffrey. "We are concerned about these manifestations of a more authoritarian approach but I want to emphasize Erdogan is not undemocratic. He believes in the vote particularly as he assumes he's going to always win."