Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Turkish voters return to the polls this weekend to choose a president. The runoff vote is

uncharted territory for Turkey, which moved in 2017 to an executive presidency from

a parliamentary democracy. Before the first round of the election on the 14th of May, polls

suggested that voters were evenly divided between the two biggest parties. However, Erdogan's

unexpectedly strong first round, where he failed

to secure an outright majority but scored a much bigger share of the vote than his rival,

has put pressure on the Turkish lira and knocked other Turkish assets ahead of this week's

runoff vote. Turkish assets fell in value as investors began reversing

the bets they had placed that new leadership might bring Turkey back to a conventional economic

policy and away from Erdogan's idea that low interest rates can cure inflation. The official annual inflation rate in Turkey was 43.7% as of April.

This is actually down from the 80% inflation rate that Turkey saw the prior year.

There's no guarantee that this slowdown will persist.

There is in fact widespread suspicion that the official numbers

understate an inflation rate that according to independent experts is actually closer to 100%.

Exacerbating the economic stress in Turkey is the vast damage caused by the powerful earthquakes

that destroyed large parts of southern

Turkey in February. In March, a government assessment put the damage at $103 billion,

or around 9% of the year's GDP. The economy will be a significant challenge for whoever wins the presidency on Sunday, as the

high inflation along with government largesse and efforts to prop up the currency are threatening

economic growth and could push the country into a deep recession.

Another term for President Erdogan would likely imply a continuation

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