(Bloomberg) -- Turkish President Recep Tayyip Erdogan won the support of a nationalist rival, boosting his chances of extending his 20-year rule at Sunday’s runoff and deepening a selloff in Turkish assets as investors bet on a continuation of his unorthodox economic policies.
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Longshot third candidate Sinan Ogan, who won 5.2% of votes in the May 14 ballot, said at a press conference on Monday that he’d support Erdogan in the next round.
Turkish markets, which sank after Erdogan’s strong showing on a first-round vote earlier this month, extended losses on the announcement, with an index of banks declining as much as 3.7%. Dollar bonds were the worst-performing in emerging markets, while the cost to insure the nation’s debt against default rose to 701 basis points, the highest since October.
Investors have been betting that another term for Erdogan will also mean living with his low-interest rate policies, which have fueled inflation, hit the currency and led to an exodus of foreign capital. Authorities have attempted to counter those impacts with interventions in markets and near-daily adjustments to regulations, a policy mix that many analysts see as excessively costly and ultimately unsustainable.
Erdogan secured 49.5% of votes in the initial round, just shy of the 50% threshold required to secure an outright win. Ogan’s support could extend the incumbent’s already comfortable lead on the next voting day.
The main joint opposition candidate, Kemal Kilicdaroglu, won 45% of the vote, as he was unable to capitalize politically on a cost-of-living crisis and criticism over the government’s response to the earthquakes that devastated the southeast earlier this year.
Erdogan’s electoral alliance also won more than half the seats in Turkey’s 600-seat parliament in a general election that was held at the same time as the presidential vote.
“It’s important that the parliament and presidency are held by the same political group to maintain stability,” Ogan said as he announced his endorsement.
A Government Job
Ogan has made it clear in recent weeks that he’d want a government position or the vice presidency in return for endorsing either candidate, making Erdogan a safer bet.
“Erdogan’s chances of reelection are practically increased now,” said Nihat Ali Ozcan, a strategist at the Economic Policy Research Foundation in Ankara. “But the economic woes are likely to haunt him in the runup to local elections in March 2024.”
The 55-year-old Ogan visited Erdogan in Istanbul Friday. His ally, Umit Ozdag, leader of the Zafer Party, met Kilicdaroglu in Ankara the same day.
Both candidates have sought to sway Ogan’s swing voters by reinforcing their nationalist credentials.
The pro-Erdogan Daily Sabah wrote on May 19 that the government and Ogan see eye-to-eye on key policies including the need to take a hard line on Kurdish separatists.
Kilicdaroglu, running on a promise to restore the rule of law, mend strained ties with the West and return Turkey to economic orthodoxy, has vowed to expel all refugees, including Syrians, from Turkey in a bid to lure support from Ozdag, who made anti-immigration policies the centerpiece of his party’s election campaign.
“Another positive development for Erdogan, who was already set to prevail in the run off,” said Wolfango Piccoli, co-president of Teneo Intelligence in London. “Kilicdaroglu’s attempt to play the nationalist card is a ill-thought, desperate move.”
It remains to be seen, however, how many votes Ogan can ultimately muster. A little-known figure backed by a small anti-immigration party, he lacks the organizational clout to corral supporters, who could end up voting in different directions.
In a sign the swing votes could be split, Ogan’s election partner said the endorsement was merely a personal choice.
“His announcement is not binding for the Zafer Party and does not represent its view,” Ozdag said on Twitter, adding that he will make a separate announcement on behalf of his party on Tuesday.
--With assistance from Tugce Ozsoy.
(Updates markets in third paragraph)
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