New Probes into Turkiye’s Opposition Party

After mayor of Istanbul, Ekrem Imamoglu, was charged with fraud allegations and got arrested on March 23, the political tension remains high in Turkiye particularly after a new wave of investigations into Turkiye’s main opposition party, Republican People’s Party (CHP), started early July. (Note: Imamoglu was officially nominated as his party’s presidential candidate following his imprisonment). First, the former CHP mayor of Izmir Tunc Soyer and 137 municipal officials were detained as part of an investigation into alleged tender-rigging and fraud early July. On July 4, ex-mayor and 59 others were jailed pending trial.

The tension peaked after CHP’s Adana mayor Zeydan Karalar, Antalya mayor Muhittin Bocek and Adiyaman mayor Abdurrahman Tutdere were detained on July 5 due to fraud and bribery allegations.  Additionally, a new probe was initiated against the CHP chairman Ozgur Ozel on July 6 due to his statements during the press conference after the (party's) executive committee meeting on July 5; "targeting President Erdogan, and openly insulting and threatening public officials" the prosecutor's statement read.

Following mentioned investigations and arrests, Turkish stocks and the TRY plummeted as of July 7. Currency was down around 0.3% against the USD, and Istanbul BIST 100 share index tumbled almost 1.6% on July 7.

We think Turkish economy will remain under pressure due to political risks as tensions remain elevated. We think this could risk the disinflationary process particularly if TRY plunges severely and a loss in investor confidence, which will likely cause the CBRT to act very cautious before restarting the easing cycle. It is difficult to foresee how things will evolve and affect the domestic economy in the next months due to political uncertainties. Turkiye’s next election is due in 2028 but could come sooner if disagreements will continue.