The latest developments in countries near Turkey have started affecting its exports. The exports that grew in the first half of the year because of higher demand in Europe remained static in July at $12.5 billion.

Economic officials had been forecasting a continuing rise in exports because of increased European demand, and thus the unexpected slowdown came as a shock. While the disappointing export figures could be partly blamed on the Eid holidays and other extenuating circumstances, the continuing losses in markets of countries such as Iraq is causing concern. In June, exports to Iraq declined 29.1%, and fell an unexpected 46.4% in July. Last year, after Germany, Iraq was Turkey’s second-most lucrative export market. In July, Iraq was in fifth place.

The major cause of the decline in exports to Iraq is the advance of the Islamic State (IS). Turkey, as a consequence of the Islamic State's capture of Mosul, is having severe problems reaching the south of Iraq. As it is much costlier to reach the south through alternative routes — for instance, Iran — exporters avoid these. There is also a decline in overall demand, and there are reports that countries such as Iran are expanding their sales to Iraq, at Turkey's expense.

Turkey, which exported $1.06 billion worth of goods to Iraq in July 2013, a year later only exported $569.5 million.