The Turkish economy is experiencing significant instability as the lira plummets and the Istanbul Stock Exchange suffers losses, amid political tensions following the detention of opposition leader Ekrem Imamoglu.

Since Recep Tayyip Erdoğan's re-election in 2023, which aimed to stabilize the economy and address social discontent, recent developments have reversed some of the progress made in previous years.

The recent arrest of Imamoglu has sparked a confrontational climate in Turkey, leading to an economic fallout.

Investors reacting to the heightened uncertainty have begun to liquidate positions, prompting a dramatic drop in the Istanbul Stock Exchange.

In an effort to curb speculation, the government has implemented emergency measures, including restrictions on short selling, which had previously attracted speculative trading.

The Turkish lira faced a sharp depreciation, prompting an intervention by the Central Bank of Turkey, which reportedly sold between $15 billion and $20 billion in various currencies to stabilize the currency.

The economic repercussions of Imamoglu's detention are pronounced, particularly in a country that relies heavily on foreign investment, tourism, and exports.

Spanish investment flows into Turkey have mirrored these challenges.

Since Erdoğan's re-election, investments in renewable energy, construction, tourism, and the agribusiness sector have continued, with the Spanish bank BBVA playing a significant role following its acquisition of Garanti Bank in 2011, investing over €8 billion.

Overall trade relations between Turkey and Spain have also experienced growth, with trade reaching approximately €9 billion annually in imports and exports, resulting in a small trade surplus of €354 million for Turkey in 2023.

Concerns are mounting over the impact of political crises such as the detention of opposition figures on Turkey's international reputation and economic standing.

A significant portion of the Turkish workforce, approximately one-third, is reliant on minimum wage, which has struggled to keep pace with inflationary pressures.

Turkey’s 2023 economic policy goals were outlined in its 12th Development Plan (2024-2028) and the Medium-Term Program (2024-2026), which promised to strengthen the rule of law, democracy, and fundamental rights—a commitment now called into question following Imamoglu's arrest.

Concrete measures outlined in these plans aimed at stabilizing the lira and controlling inflation have yet to deliver results.

After reaching nearly 80% in inflation in 2022, Erdoğan implicitly acknowledged the shortcomings of previous monetary policy strategies, with the interest rate increasing from 8.5% in May 2023 to 50% in March 2024. This adjustment was interpreted as a signal that Turkey was moving away from its previous economic deviations.

Despite these changes, inflation remains around 40%, challenging domestic economic conditions.

The recent turmoil has caused short-term investors to withdraw, while potential new investors may hesitate due to the recent political and economic climate.