The arrest of Istanbul’s mayor, Ekrem Imamoglu, on 19th of March has reignited political instability in Turkey, sparking mass protests and rattling investor confidence. While the Turkish stock market saw a brief rebound—rising 2.8% on 24th March after a steep 16.3% plunge—economic anxiety remains high. Over 1,100 protestors have been detained, and the government has banned short-selling while burning through an estimated $26bn in foreign reserves to defend the lira.
This political turmoil threatens to undo months of economic reform. Under Finance Minister Mehmet Simsek, Turkey had begun to stabilise its economy: interest rates were raised, spending was curbed, and inflation fell from triple-digit inflation in 2022 to 39% now. Foreign reserves were rebuilt to around $97bn, and investor interest had cautiously returned. But the authoritarian tilt under President Erdogan—now highlighted by Imamoglu’s arrest—has undermined that fragile trust.
These events have broader consequences, particularly for Turkey’s global ambitions. Turkey’s long-standing desire to join the European Union has always hinged not just on economic stability but also on democratic standards and human rights. The current crackdown sends a damaging signal to Brussels, further weakening Turkey’s candidacy at a time when EU accession talks are already frozen.
Moreover, it complicates Turkey’s post-Brexit trade relationship with the United Kingdom. In 2020, the two countries signed a free trade agreement covering goods worth over £18bn annually. Future expansions to this deal—particularly in services and investment—require a stable, rule-based environment. Political repression and economic uncertainty make British businesses more cautious, potentially stalling deeper trade and investment ties.
In the short term, the Turkish central bank may be able to stabilise the lira, but sustained political unrest could prompt capital flight and force a return to tight monetary policy, stalling growth. In the longer term, Erdogan’s crackdown could isolate Turkey from Western allies and economic partners just when it needs them most.
Turkey stands at a crossroads. It can continue with hard-won reforms and open itself up to the global economy, or it can double down on political repression—at great cost to its credibility and future. The arrest of Imamoglu may silence a political rival, but it is also silencing investor optimism and weakening Turkey’s standing on the international stage.
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