Erdogan’s election lead leaves Turkey’s opposition reeling and an economy on the brink

Going head-to-head with Erdogan, Kilicdaroglu pledged a return to core democratic values and economic orthodoxy after his rival’s heavy influence over the Turkish Central Bank sent foreign investors running.

He and his supporters accuse Erdogan of pulling the country toward authoritarianism, as Erdogan’s reforms over the years concentrated his presidential power, and his government oversaw heavy crackdowns on protest movements and the forced closure of many independent media outlets.

Despite all this, Kilicdaroglu, and the alliance of six parties he represents, fell short. People are pointing to a variety of reasons: his shortcomings as a candidate, the inaccuracy of pollsters, Erdogan’s government blocking more viable opposition, and the enduring popularity of Erdogan himself.

Kilicdaroglu is a “subpar candidate,” Mike Harris, founder of advisory firm Cribstone Strategic Macro, told CNBC Monday, “but he still should have been able to win this thing, considering how big Erdogan’s negatives are, and what a disaster things are for the economy.”

Harris said that once Kilicdaroglu was selected as a candidate, and “that mistake was made, these are the cards we have to deal with. And it looks like the result is — it’s gonna be a close one.”

Kilicdaroglu’s party, the CHP, strives for the fiercely secular model of leadership first established by Mustafa Kemal Ataturk, the founder of the modern Turkish state. It’s known for being historically more hostile to practicing Muslims, who form an enormous part of the Turkish electorate, although the CHP under Kilicdaroglu has softened its stance and was even joined by former Islamist party members.

People who criticize the opposition’s choice of candidate point to the fact that the CHP has repeatedly lost elections to Erdogan’s powerful conservative and religious AK Party since Kilicdaroglu became its leader in 2010. The CHP’s six-party platform is also an alliance of dramatically diverse parties, prompting concerns over its risk of fracturing once in power.

Kilicdaroglu promised an overhaul of economic policies, something that many investors had hoped for.

That hope turned to worry after Sunday’s result, however, with a 6% fall in the Borsa Istanbul stock exchange, a nearly 10% dip in banking stocks and the lira’s biggest percentage drop against the dollar in six months.

“Unfortunately it looks like [what] up to 49% of Turks have voted for is an economic crisis … The next two weeks, we could see the currency collapse,” Harris said.

The monetary tools Erdogan’s administration has been using to give the economy a semblance of stability are unsustainable, economists warned, and after the election will have to stop — likely leading to severe volatility.

“Erdogan’s significant outperformance in round one represents one of the worst case scenarios for Turkish assets and the lira,” said Brendan McKenna, an emerging markets economist at Wells Fargo.

He expects the lira, currently trading at 19.75 to the dollar, to have a “significant selloff” in the near future and forecasts it falling to 23 to the greenback by the end of June.

Beata Javorcik, chief economist at the European Bank for Reconstruction and Development, told CNBC that Erdogan had “prioritized growth over macroeconomic stability.”

“There is a limit to how long you can pretend the basic laws of economics do not apply,” she said. “So there will be some hard choices that the government in Turkey will have to make, regardless of who leads this government.”

An unexpected kingmaker has also emerged in the form of Sinan Ogan, an ultra-nationalist third-party candidate who outperformed expectations with more than 5% of the vote. Who his voters support in the second round could determine the final result — and they’re unlikely to throw their support behind Kilicdaroglu.

Kilicdaroglu, meanwhile, has reshuffled his campaign team, reportedly firing some staff and stressing that the election’s fate is not yet sealed. “I’m here till the end,” he said in one video, slamming his hand on a table. But critics point out that he still has not spoken publicly to his supporters, and say he lacks a clear runoff strategy.

“Kilicdaroglu’s non-appearance on Monday and the subdued mood from his camp have dealt a heavy blow to his base,” Ragip Soylu, Turkey bureau chief for Middle East Eye, wrote on Tuesday.