Turkey’s Justice and Development Party (AKP), in power for almost 18 years, is facing an alarming flight of foreign investors after years of abundant foreign funds that helped the economy grow and the party sustain its rule. The flight has contributed to Turkey’s hard-currency crunch and could prove disastrous for the AKP’s political future. 

What drew investors to Turkey initially was not the AKP rule itself, but a far-reaching economic recovery program, sponsored by the International Monetary Fund, that the previous government had launched after a major crisis in 2001. Global economic trends generated further tailwinds for the AKP and a staggering $525 billion streamed into Turkey over 15 years, including direct investments, stock exchange investments and external loans. This meant an average inflow of $35 billion per year or almost the equivalent of the $41 billion total that Turkey had managed to attract over the 18 years to 2002, when the AKP came to power. 

Riding the wave of foreign funds and economic growth, the AKP sustained its political ascent, which culminated in the introduction of an executive presidency system in 2018 that bestowed sweeping “one-man” powers to President Recep Tayyip Erdogan. 

Since 2018, however, the tide has turned, with the AKP losing not only foreign funds but also political support, as evidenced by the drubbing it took in the municipal polls last year. The flight of foreign capital has contributed to the depletion of Turkey’s foreign currency reserves, which dropped by $25 billion in the first four months of the year. The AKP has little to offer foreigners to revive their investment appetite. And without foreign funds, keeping the economy rolling is a tall order. Thus, the exodus of foreign investors might prove a critical downside precipitating the AKP’s political fall.