Turkey's devastating earthquake comes at a critical time for the country's future

Life for millions across Turkey and Syria changed forever on Monday, as two consecutive earthquakes sent shockwaves across hundreds of miles.

Nine hours apart and with magnitudes of 7.8 and 7.5 on the Richter scale, the quakes rocked Turkey and Syria and were the region's strongest in nearly a century.

At the time of writing, the death toll from the quakes is more than 12,000, with many still missing and critically injured. The World Health Organization put the number of people affected by the disaster at 23 million. At least 6,000 buildings collapsed, many with residents still inside them. Rescue efforts continue to be the top priority, with some 25,000 deployed in Turkey and thousands more sent in from overseas — but a bitter winter storm now threatens the lives of the survivors and of those still trapped under rubble.

Syria, ravaged by 12 years of war and terrorism, is the least prepared to deal with such a crisis. Its infrastructure is heavily depleted, and the country remains under Western sanctions. Thousands of those in the affected areas are already refugees or internally displaced people.

With the dust of the catastrophe still settling, regional analysts are zoning in on the longer-term rippling effect that the catastrophe could have on Turkey, a country whose 85 million-strong population was already mired in economic problems — and whose military, economy, and politics have a major impact far beyond its borders.

This year will serve as a critical inflection point for Turkey, as it approaches a presidential election on May 14. The result of that election — whether current President Recep Tayyip Erdogan stays in power or not — has massive consequences for Turkey's population, economy, currency, and democracy.

Erdogan's response to the disaster — and potential calls for accountability as to why so many buildings were insufficiently designed to withstand such tremors — will now play a major role in his political future.

"If the rescue effort is mishandled and people get frustrated, there's backlash," Mike Harris, founder of Cribstone Strategic Macro, told CNBC on Tuesday. "And the other issue of course, is the buildings and which ones have gone down. To the extent these were built under the new codes and the authorities didn't impose regulations, there could be some serious blowback for Erdogan. So Erdogan's lost control of the narrative."

Erdogan called for the early May election amid a national cost of living crisis, with local inflation above 57% — down from more than 80% between August and November. Several analysts say that the move reveals Erdogan's urgency to secure another term in power before his controversial economic policies backfire.

Harris described the president created "this weird situation where inflation is running at 80%, but he needs to keep the currency stable between now and the election."

Through very unorthodox policies, Erdogan has "found a very creative way, a very costly way, to de-dollarize the economy, basically," he said, giving examples like allowing Turks to keep their bank deposits at a 13% interest rate, then promising to cover their losses, if the currency drops further.

Harris boldly predicted: "Actually, the currency has to collapse if he wins, because there will be no confidence and he's created this artificial scenario that can't be sustained for a prolonged period of time."

Additionally, Erdogan's earlier fiscal pre-election promises — populist moves like increasing salaries and lowering the pension age — may be impossible now, as more public funds will need to be directed toward rebuilding entire cities and towns.

Turkey's economic decline has been fueled by a combination of high global energy prices, the Covid-19 pandemic and war in Ukraine, and, predominantly, by economic policies directed by Erdogan that have suppressed interest rates despite soaring inflation, sending the Turkish lira to a record low against the dollar. Turkey's FX reserves have dropped sharply in recent years, and Ankara's current account deficit has ballooned.

The Turkish lira lost nearly 30% of its value against the dollar in the last year, severely damaging Turks' purchasing power and hurting Erdogan's popularity.

Turkey's opposition parties have not yet put forth their candidate. The strongest potential challenger, Istanbul Mayor Ekrem Imamoglu, was arrested and slapped with a political ban in December over charges his allies say are politically motivated and used solely to prevent him from running for president.

Investors in recent years have been pulling their money out of Turkey in droves. One major emerging markets guru, Mark Mobius of Mobius Capital Partners LLP, remains bullish despite the earthquake disaster and economic problems.

"When it comes to investing in Turkey, we still believe it's a viable place to invest," Mobius said. "In fact, we do have investments there. The reason is the Turks are so flexible, so able to adjust to all these disasters and problems ... even with high inflation that with a very weak Turkish Lira ... So it doesn't scare us at all to invest in Turkey."

Mobius did note the glaring issue of Turkey's earthquake preparation, which may soon come to haunt Erdogan's election chances.

"This is one of the big problems, the building codes in some of these areas are not up to par," he said.

Internationally, Turkey's future affects the war in Ukraine, given Erdogan's role as a mediator between Ukraine and Russia. Turkey is the main NATO member still standing in the way of Sweden and Finland's accession to the powerful defense alliance.

Ankara is also brokering the Black Sea Grain Initiative between Ukraine and Russia, which allows vital supplies of grain to be exported from Ukraine to the rest of the world despite a Russian naval blockade on Ukraine's Black Sea ports.

Erdogan's response to the earthquakes — and subsequent election performance — will have an impact on all of these.

Turkey will get some relief from Western pressure on its NATO stance in the wake of the earthquakes, but not for long, says Sinan Ulgen, chairman of the Istanbul-based Center for Economics and Foreign Policy.

"It's going to be temporary," Ulgen said. "Turkey will look at a few weeks of reprieve, but after that it will be more back to business on the foreign policy side."

For now, Western allies and countries from around the world are sending aid and rescue teams to help with Turkey's disaster relief efforts. Ankara will need to roll out massive public spending to support those in need and rebuild all the areas affected by the quakes.

"The positive side is that Turkey has fiscal space," Ulgen said. Turkey has a public debt-to-GDP ratio of around 34%, which is very low compared to the U.S. and Europe. According to him, this "means that Turkey has room for fiscal spending, even if that means a sizeable increase in the public debt ratio."

As a large country, Turkey has significant capacity to handle natural emergencies. Still, Ulgen added, "no matter what the capacity at hand, it was going to be insufficient to respond to this type of disaster unfortunately."