Similar to the preceding years, 2023 was characterized by heightened geopolitical instabilities, exacerbated by the war in Gaza. The growing adversarial nature and instability in the world order cast a shadow over global growth prospects and introduced new uncertainties. West’s, specifically the U.S.’s “carte blanche” to Israel perceived as a double standard in the Global South, as a result, many are questioning the credibility of the rules-based international order. Additionally, the concurrent conflicts put the EU’s aspiration to be a geopolitical powerhouse to test. 2023 also bore witness to a continuation of neo-statist policies, an increase in interventions within global supply chains, and a growing emphasis on self-sufficiency.
The economic sphere offered a glimmer of optimism. Defying recessionary forecasts, 2023 painted a surprisingly optimistic picture for the global economy. Consumer resilience, bolstered by lessening inflationary pressures, slightly weathered the storm of geopolitical shocks. A concerning milestone was also reached as 2023 became the hottest year on record, emphasizing the urgency for collective action to address the climate crisis.
In Turkey, 2023 saw the nation grappling with devastating earthquakes and President Erdoğan’s victorious election in May. Among the significant outcomes of the May elections was the normalization of economic policies, with Erdoğan steering back toward orthodoxy. His technocrat cabinet selection reflected this approach and aimed to restore international trust. This shift has boosted investor sentiment to a certain extent, as evidenced by reduced CDS numbers and higher reserves. Yet, this limited progress is not mirrored in FDI inflows, and the outlook for 2024 remains overshadowed by persistent inflationary pressures and ongoing macroeconomic vulnerabilities.
In terms of foreign policy, building on its 2021 shift towards diplomatic recalibration, Ankara’s charm offensive initiatives such as rapprochement with Greece and Egypt exemplified its continued prioritization of normalization over its former assertive stance. Meanwhile, the deadlock involving the F-16 deal, which is tied to Sweden’s bid for NATO membership, is very close to being resolved following the parliamentary approval of the bid (Finally, a good sign for Turkey-U.S. relations). Throughout the 2023, Turkey’s relations with the West saw limited significant progress and set to remain transactional for the 2024. One should also note that President Erdoğan’s pro-Hamas stance escalated the risks of tension, yet it has not resulted in a tangible strain in ties with West.
In the post-election domestic landscape, the country witnessed the collapse of CHP-İYİ Parti collaboration (which brought victory for the opposition in 2019 locals) and a change in leadership in the CHP. Although the opposition still seems to lack consolidated support to entirely alter the political scene, CHP maintains a favorable stance to retain control over the major metropolitan cities secured in 2019 in the upcoming locals in March 2024. It might even add couple of more cities. İmamoğlu’s potential re-election as İstanbul mayor could set him up as a highly likely contender for the 2028 presidential elections. Therefore, it’s crucial to monitor closely the ongoing legal proceedings against him.
2024 Global Outlook
2024 will be marked by a global elections super-cycle, representing about 54 % of the world’s population and nearly 60 % of the global GDP. Notably, national polls are scheduled in the U.S., India, Indonesia, Mexico, South Africa, and the European Parliament, and most likely in the UK. Additionally, local elections are set to take place in Türkiye.
This will not only bring regulatory and policy uncertainty, but will also test the resilience of democracies worldwide. AI-driven election interference will also emerge as a significant global risk, capable of exacerbating social divisions. The elections in both the U.S. and the European Parliament will also have repercussions for Türkiye.
This year marks a continued evolution into a new phase of globalization, set against the backdrop of an increasingly multipolar world, yet still profoundly shaped by the tensions between the U.S. and China. It’s evident that the competitive dynamic between the U.S. and China is a defining feature of this century, expected to persist throughout. It’s also worth noting that that increasing geopolitical risks will further drive governments to focus more on creating resilient and reliable supply chains (namely friendshoring and de-risking, China+1).
These superpowers face internal challenges, with the U.S. dealing with high polarization (which is expected to deepen with Biden-Trump rematch) and China grappling with macroeconomic struggles. Moreover, the influence of “geopolitical swing states” such as India, Indonesia, and Türkiye in altering the status quo will contribute to a more complex geopolitical environment.
In 2024, the trajectory of inflationary trends will play a decisive role in the global economy, impacting exchange rates, interest rates, asset prices and debt sustainability across various regions. Economic security measures aimed at “de-risking” interdependencies will become a key tool in geostrategic competition. Although global economic growth is expected to be stable yet unimpressive, there is an anticipation of a potential reduction in interest rates by major central banks in the latter half of the year (Some predict the same for Türkiye’s CBRT as well). Furthermore, governments worldwide are expected to adopt protectionist measures that could disrupt the flow of critical minerals.
At the same time, there is a sustained shift towards industrial policy in the U.S. and Europe, (and in the rest of the World) raising concerns about a more protectionist environment for global trade and foreign direct investment. The semiconductor sector exemplifies the convergence of industrial policy and national security, with major economies now treating chip production as a strategic imperative. (e.g. Chips Act) Last but not least, an expected peak in the El Niño climate pattern is likely to cause extreme weather events, leading to increased food insecurity and logistical disruptions.
Temmuz Yiğit BEZMEZ