This weekend, millions of Turkish citizens are taking part in events to celebrate the centenary of the founding of the Republic in 1923. 

In Istanbul there will be a massive lights display featuring drones and fireworks over the Bosporus, while in town squares around the country digital screens will show a visual presentation highlighting the Republic's achievements over the last 100 years, and looking forward to what the ruling AKP has dubbed the next 'Century of Türkiye.'

After years of policy shifts that have at times alarmed its NATO allies, there are signs that Türkiye is seeking to recalibrate its ties with Washington and Brussels. 

As the Republic enters its second decade, can we expect to see a Türkiye as its founding father Mustafa Kemal Ataturk envisaged? A nation breaking with its Ottoman imperial past in favour of a western focused democracy? Or instead, a country forged by what leader Recep Tayyip Erdogan has called a "pious generation" seeking a unique position in the new multi-polar world order?

Foreign Policy: Friends and neighbors

Türkiye maintains the second largest army in NATO, having joined the alliance in 1952. But relations with fellow members have come under strain in a number of areas including its role in conflicts in Syria and Libya.

In 2019, Ankara's controversial $2.5B purchase of Russia's S-400 missile system saw Türkiye ejected from NATOs flagship F-35 combat fighter plane programme. Later that year, an alleged standoff between Turkish vessels and a French warship off the Libyan coast, where the two NATO members had backed opposing sides in the conflict, led to France pulling out the group's peacekeeping mission in the region.

In the summer of 2020 France sent warships to the eastern Mediterranean in support of Greece, after tensions between Athens and Ankara over gas drilling rights reached an impasse. The two clashed again earlier this year, over Türkiye's support for Azerbaijan's campaign in Nagorno Karabakh.

Türkiye's aerial bombardment of northern Syria after the U.S. troop withdrawal of October 2019 has put Ankara on a collision course with Washington, which maintains a small military cohort alongside Kurdish backed Syrian Democratic Forces, which fought to oust ISIS from the region.

In the conflict in Ukraine, Türkiye has armed Kyiv with drones that have proved critical in its defence of the east of the country, and negotiated for the safe passage of Ukrainian grain ships across the Black Sea. But with bilateral trade ties between the two nations put at US$62B in 2022, it has declined to join western sanctions on Russia.

However, last week, NATO members welcomed the news that, after a 17-month delay, President Erdogan had submitted a protocol to the Turkish Parliament to ratify Sweden's bid to join the bloc. Nonetheless, Ankara continues to seek concessions from Stockholm for the bid to go through, notably over the extradition of refugees it accuses of terrorism.

Türkiye's economy: Beefing up or belt tightening?

After the ruling AKP's success in May's election, Erdogan hinted at a change to his long term policy of cheap borrowing to boost manufacturing and export led growth in the republic's $900B economy.

Cheap liquidity helped push the official inflation rate to 85 percent last October, and the cost of living was identified as a key voter concern ahead of polls. Erdogan reinstated the AKP's former finance chief Mehmet Şimşek, while ex-Goldman Sachs economist Hafize Gaye Erkan became the central bank's first woman governor.

Since June, the new economic team has undertaken a series of aggressive interest rate rises taking the headline borrowing cost from 8.5 percent to 35 percent in five months. Türkiye now has one of the highest central bank rates in the world. 

Şimşek has said, with inflation rising again, the republic "is in the process of pulling out of a geopolitical recession." In a change of tone, Erdogan has promised "tight monetary policy" to tame rising costs. But some economists have questioned his long term commitment to fiscal discipline, once prices cool. 

Earthquake legacy

The devastating earthquakes across southern Türkiye in February have left the republic facing a bill of over $34B. In July the AKP announced plans for a new corporate tax to fund rebuilding, with Erdogan pledging to replace half of lost housing stock within a year. Nine months on, hundreds of thousands remain homeless, while a drift to the urban areas of Ankara and Istanbul by survivors has put pressure on local resources.

Türkiye and Europe

At the NATO Vilnius summit in July, Erodgan linked support for Sweden's accession to the bloc to Türkiye's stalled EU membership bid. Despite an official candidate status, granted in December 1999, Türkiye's application remains on hold. Perceived democratic back-sliding in the wake of the failed military coup of 2016 has caused concern in Brussels.

Türkiye is also facing removal from the Council of Europe, the bloc's leading human rights body, over the ongoing imprisonment of two of its most high-profile political prisoners, philanthropist Osman Kavala and former chair of the pro-Kurdish Peoples Democratic Party (HDP) Selahattin Demirtas. The AKP accuses both men of terrorism.

In July, Germany's foreign minister Annalena Baerbock described Ankara's bid as being "deep in the freezer."

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The next 'Century of Türkiye'

With progress over its EU accession flat, Türkiye is seeking new economic partners around the world and is investing in the industries of the future. While manufacturing, textiles and construction remain key to the country's economy, new industries are growing fast. 

Demand for electricity is rising by close to 5 percent a year, and with Türkiye largely import dependent for energy, the renewables sector is advancing rapidly. Türkiye has targeted net zero emissions by 2053, as it reduces its dependence on fossil fuels.

Between 2018 and 2021, clean power use from wind and solar installations rose by over a fifth. Global energy giants like France's TotalEnergies, UAE's Masdar and Japan's Enechange have all announced investments in Türkiye's renewable sector.

Elsewhere, revenue from defense sales rose by over 40 percent between 2020 and 2021. Much of this was from worldwide demand for the powerful Bayraktar drones.

Tourism, particularly in the health and cosmetic surgery sectors, continue to see rapid growth. The Turkish cosmetic surgery sector, worth $2bn a year in 2018, is estimated to be worth close to $5bn by the end of the decade. 

Challenges ahead

In 2010 Türkiye's president pledged to make the economy one of the world's 10 biggest by 2023. Despite consistent GDP growth, it has remained at 19th. His recent rhetoric over the conflict in Gaza has also rattled Washington and Brussels, and led to Israel removing its citizens and diplomats from the country.

Erdogan's next test in power will come in local elections in 2024, where the AKP is looking to seize back control of Türkiye's biggest city and economic hub Istanbul, as well as the capital Ankara from the opposition republicans. 

Creating stable economic conditions, maintaining good relations with long term allies and winning back much needed overseas investment are set to be key in securing urban votes.

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