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Turkey election provides little hope for battered economy


Turkey is holding its second parliamentary election in five months Sunday with analysts fearing it will fail to resolve the political deadlock that has crippled the economy.

All the opinion polls currently indicate that the November 1 election will result in another hung parliament, similar to the last election on June 7, in which no one party gained a majority to govern alone.

"Turkey needs this election like it needs a hole in the head," Nicholas Spiro, head of risk consultancy Spiro Sovereign Strategy, told CNBC via email, He warned that Turkey was "treading on thin ice" economically as sentiment towards emerging markets, and Turkey in particular, deteriorated.

The polls suggest that the Justice and Development Party (AKP) – the conservative party set up by Turkish President Recep Tayyip Erdogan, which has been in power since 2002 – will win around 40 to 42 percent of the vote. This would be enough to ensure that it remains the largest party in parliament, but would fall short of the 44 to 45 percent required to secure a majority, according to analysis by risk consultancy Teneo Intelligence.

Justice and Development Party (AKP) supporters wave party and Turkish flags at Istanbul`s AKP headquarters on June 7.
Market turmoil in Turkey after crushing election

The Republican People's Party (CHP) is expected to finish second, followed by the Nationalist Action Party (MHP). Polls also show that the pro-Kurdish Peoples' Democratic Party (HDP) will comfortably cross the 10 percent threshold to be represented in parliament with 12 to 13 per cent of the vote, Teneo said.

The election comes at a critical time for Turkey amid its involvement in the battle against the so-called Islamic State terrorist group in neighboring Syria, which has heightened geopolitical concerns among voters.

Many feel that the Turkish state is using the conflict as an excuse to attack Kurdish fighters in Syria (who are also opposing Islamic State) and clamp down on the Kurdish minority at home. As a result, Turkish-Kurdish tensions are at an all-time high with spates of violence and bomb attacks taking place in Turkey over recent months.

Traffic is seen crossing the Bosphorus Bridge, seen from the eastern, or Asian side of Istanbul, Turkey.
Photographer | Collection | Getty Images

With the polls pointing to an uncertain outcome and sectarianism expected to increase whatever the result, economists are worried about the effect it could have on Turkey's once-booming economy which has been laid low by a global slowdown and most recently, the region's migrant crisis.

"The economy has slowed dramatically, ethno-sectarian violence is flaring, the refugee crisis is deepening, the inflation-fighting credibility of the central bank is in tatters and sentiment towards emerging markets remains bleak. This is an election which should have never been called in the first place," Spiro told CNBC.

The once booming economy that grew 9.2 percent in 2010 is now forecast to grow by 3 percent in 2015, according to the International Monetary Fund's latest forecasts, and 2.9 percent in 2016.

Like other Turkey watchers, Spiro believes that Erdogan has been using the Syrian conflict "to shore up the nationalist vote in order to improve the chances of his AK party governing alone."

Turkey: A former emerging market star stumbles

"Yet it looks like the election will deliver the same result as the previous one: a fragmented parliament in which the (AKP) is forced to form a coalition," he said.

Despite this, the AKP could feasibly form a governing coalition with the far-right MHP, as they are the most similar on policy. Sinan Ülgen, visiting scholar at political analysis firm Carnegie Europe, said in a note that "the feasibility of such a scenario will greatly depend on whether the MHP leadership will, after the election, decide to relax some of its conditions for partnership."

Among its conditions for an alliance could be, according to Ulgen, that the AKP agrees to an "unfettered investigation of graft allegations against members of the previous government, including Erdogan's associates; Erdogan's compliance with the constitutional limits on the presidency; and the end of ongoing peace talks between the Turkish government and Turkey's restive Kurds."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld