Turkey today is going through one of its most difficult periods since its founding 78 years ago by Mustafa Kemal Ataturk. The country faces grave economic problems, including the daunting task of reforming its banking sector, reviving foreign investment and slashing domestic spending.
Despite the challenges, experts see reason for optimism in the longer term.
International Monetary Fund officials say the country will pull through when the benefits of fiscal discipline, mainly declining debt ratios and falling interest rates, kick in.
In an open letter published August 14 in the Financial Times, a director for the European Department of the IMF said: 'It may just be a matter of time for the markets to appreciate Turkey's stronger fundamentals. Already inflation is slowing, the current account is swinging sharply into surplus and growth appears to be turning on the strength of booming exports and tourism.'
The crisis has seen the local currency, the lira, losing more than 40 per cent of its value since February this year. One US dollar now buys about 1.6 million lira.
Adding to the problem, inflation is roaring ahead at the annual rate of 60 per cent. Fearing rapidly declining values, businesses and consumers have switched to marks, sterling and US dollars for all but the most simple daily transactions.
The purchasing power of wages has been halved, and thousands of bankruptcies have contributed to an already bleak unemployment picture. An estimated 600,000 people have become jobless since the crisis began.