Former prime minister Ahmet Davutoglu, who was a close ally of President Recep Tayyip Erdogan, has strongly criticized the ruling AK Party, blaming policy changes and an alliance with nationalists for its poor performance in Turkey's local elections last month.

In his first major public challenge to Erdogan since leaving office three years ago, Davutoglu, an AKP member, slammed on Monday the party's economic policies, media restrictions and the damage he said it had done to the separation of powers and to Turkey's institutions.

In a serious blow to Erdogan, the AKP lost control of the capital Ankara and Turkey's largest city Istanbul in the March 31 elections. The AKP and its Islamist predecessors had governed the two cities for 25 years.

"The election results show that alliance politics have caused harm to our party, both in terms of voter levels and the party's identity," Davutoglu said in a 15-page statement.

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He also said recent economic policy decisions showed a move away from free market principles and that "scaring global investors necessary to the development of the country is a dead-end".

The Turkish economy slipped into recession in the last quarter of 2018 after a currency crisis which has wiped 35 percent off the value of the lira since the start of last year.

"The main reason for the economic crisis is an administration crisis. Trust in the administration vanishes if economic policy decisions are far from reality," Davutoglu said.