In three weeks, Turks will vote in new presidential and parliamentary elections that are likely to see the return of President Recep Tayyip Erdogan. With widely extended executive powers, Erdogan is expecting to emerge as an even more assertive leader.

His ruling Justice and Development party (AKP) may do less well since pundits point to an erosion of popular support. However even if he loses legislators, Erdogan’s new presidential powers could enable him to sidestep parliament by issuing decrees.

The president must be well aware that there are stormy economic waters ahead, which is why he advanced the date of these elections by 18 months. By that time his administration could have found itself in trouble because of anti-inflationary measures most economists believe are essential to restore the country’s financial fortunes.

Turkey is running a steep budget deficit. The government has to find around $200 billion a year to service its foreign debt and holds only $85 billion in foreign currency reserves. The corporate sector is also heavily in debt having borrowed almost $300 billion in foreign currency. The collapsing value of the Turkish lira, which has declined around 18 percent so far this year, makes these loans harder to pay off from domestic earnings. A number of companies have been forced into rescheduling their debts with both local and foreign banks. Renegotiating loans is an expensive business both in terms of arrangement fees and increased interest rates. For companies already in trouble, refinancing postpones the drying up of credit and potential bankruptcy.

Turkish economic growth, which thanks to government stimulus packages last year approached 7.5 percent, is heading toward a maximum of only 2.5 percent this year and there are some analysts who are predicting negative growth.

To defend the lira, the Turkish central bank last month hiked interest rates three percent to 16.5 percent. This has given the currency a breathing space. But there is an expectation that further rate increases are likely. While these may make short-term lira-denominated securities an attractive investment for overseas investors, in general the international markets are starting to run scared of Turkish risk.

It is typical that Erdogan is claiming there is a conspiracy of international capital against his administration. But his protests only serve to highlight the shakiness of Turkish finances. The man who is arguably the Turkish republic’s most successful president does not seem to appreciate the limitation of his powers to control the confidence of foreign investors. Until recently, Turkey’s economic growth, with the serious blip in 2001, caused in the main by over-lent banks, was remarkable.

On June 24, Erdogan fully expects to be given a further five years in power. It is likely he will quickly bring in tough measures to try and curb inflation and bring the economy back under control, in the belief that in 2023 when he again faces the voters, it will be on a record of renewed prosperity. However, he is now involved in an expensive shooting war in northern Syria, has alienated Washington by his closeness to Moscow and Tehran and vexed the EU with his crackdown on political opponents and increasingly dictatorial behavior. If he wins a renewed and indeed more powerful mandate in three weeks, Erdogan would be wise to proceed with a caution that, however, may no longer be part of his political makeup.