A collection of Turkish currency.

The Turkish lira and stocks soared on Monday after President Recep Tayyip Erdogan’s Justice and Development Party (AKP) was returned to power in a surprise weekend election victory, but analysts warned the rebound may be shortlived.

The lira jumped almost four percent to 2.8 to the dollar in late afternoon trade, after earlier gaining 4.4 percent in the morning to its highest level in seven years.

The currency had tumbled more than 25 percent this year on concerns about the faltering economy in the key emerging market and months of political turmoil.

It was also up 3.6 percent against the euro at 3.09.

The main index on the Istanbul stock exchange, the BIST, was up 5.5 percent at 83,787 points in late afternoon trade.

Sunday’s election saw the AKP win back its overall majority in parliament, paving the way for one-party rule once again following an inconclusive result in June.

The AKP won almost half the vote, giving it 316 seats in the 550-member parliament according to latest results, and is now set to rule Turkey until 2019.

“The Turkish lira could now see one of its strongest periods, moving closer to two per dollar down from three,” wrote FXstreet analyst Valeria Bednarik in a note published by the Anatolia news agency.

“This election will end Turkey’s period of transition, and should lead to a marked strengthening of the country’s economy.”

Turkey’s premier-turned president Erdogan owes his popularity to bringing economic prosperity to millions of ordinary Turks, many of them religiously-conservative small business owners who form the bulk of his support.

Many credit him and the AKP with rescuing the country from the mire of a 2000-2001 financial meltdown and creating jobs as growth rates soared to around 10 percent.

Inan Demir, chief economist at Finansbank, said although markets were expected to rise on the removal of immediate uncertainty, question marks remained over the fate of the Kurdish peace process, future economic policies and whether the AKP would press on with a clampdown on its domestic rivals and critical media.

Wolf-Fabian Hungerland, economist at the Germany-based financial institution Berenberg, said political risks had vanished only temporarily as the election left Turkey with an overly self-confident government, a politically polarized electorate and a financially vulnerable economy.

“Political risk has not disappeared, but the day it will materialize has probably just been postponed,” he noted.

And analysts warn that deep economic problems remain in the emerging market, whose tourism industry has also been hit by security worries.

The election win “has alleviated concerns about further political uncertainty, but it remains to be seen whether the party will try to regain its economic policymaking credibility that had slowly eroded over the past few years,” London-based Capital Economics said in a note.

“Our expectation is that equities will lag behind those elsewhere in the emerging world, while we anticipate that a fragile lira will eventually force interest rates higher and underpin a poor performance by local currency bonds.”

Turkey’s economic growth slid to less than three percent last year and is expected to stagnate at similar levels next year, which economists say is not enough to create jobs.

Exports also slid 1.5 percent to just over $12 billion in October, according to the Exporters’ Assembly of Turkey (TIM) and by 7.8 percent over the year so far to almost $146 billion.

TIM president Mehmet Buyukeksi urged the new government to work on ways to revive exports with a special focus on Turkey’s main market, the European Union.

“As exporters, we hope to see more focus on achieving structural reforms, which aim to boost exports and industry-based production, maintaining the rule of law and strengthening the independence of courts,” he said.

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