In a few days, Turkey will leave a tough year behind, fraught with political and economic setbacks. Two general elections in 2015 had contributed nothing to the country’s stability, instead paving the way for more tension, conflict and polarization. Tensions peaked with the July 15 coup attempt this year and continued with a crackdown on the Kurdish political movement and its representation in parliament, the Peoples’ Democratic Party (HDP). Then, in August, Turkey joined the warring parties on the ground in Syria, launching Operation Euphrates Shield, which in its essence is aimed more at blocking the advance of the Syrian Kurdish Democratic Union Party's military wing than combating the Islamic State. While those developments increased Turkey’s political and geopolitical risks, a string of bloody suicide bombings and the assassination of the Russian ambassador in Ankara further added to the gloom in the final weeks of 2016. Economic damage was inevitable given the heightened risks.

Standard & Poor’s and Moody’s cut Turkey’s credit rating to non-investment grade, while the US dollar, which had risen 25% against the Turkish lira in 2015, continued to gain ground, especially after October. Turkey will end the year with a dollar that is 16% more expensive to buy with Turkish liras. True, the rise of the greenback was global, but the lira slid more than other currencies.

Under the Justice and Development Party (AKP), Turkey’s economic growth has relied heavily on external funds, secured overwhelmingly through borrowing that has averaged $38 billion per year. A populist, vote-boosting approach to growth has always been at the fore: “Whatever gets votes is fine!”

Focused on the construction sector and oriented toward domestic demand, the country’s economic growth provided the masses with jobs and income, even if at a minimum wage level, while opening the door wide to debt accumulation, either through consumer loans or credit cards. The government thought little of using external funds for export industries or other sectors that could earn foreign exchange. With domestic consumption driving growth, indirect tax revenues surged, contributing to increased and well-veneered spending on health care, social benefits and transport projects. With this strategy, the AKP was not only creating its own bourgeoisie, but also boosting its popular support while building an authoritarian regime.