Until early 2017, Turkey appeared to be headed toward an economic crisis, the first omens of which came in the second half of 2016 and intensified toward the end of the year. The economy had begun to contract and was technically entering a crisis, but the governing Justice and Development Party (AKP) succeeded in “managing” things, and Turkey — at least for now — stands away from a full-blown crisis. Yet steering the ship away from the rocks came at a hefty price, which is equally important. The Turkish economy today is more fragile and less resilient.

For starters, let’s recall how Turkey came to the brink. In 2015, the economy grew about 6%. The inflow of foreign funds, which the Turkish economy needs badly to grow, had fallen short of expectations, but the much-needed foreign exchange was met through Central Bank reserves and savings kept abroad. The first half of 2016 did not go badly, with growth standing at about 5%. In the second half, however, the rate dropped to 1% after a negative growth of 1.3% in the third quarter, which was widely seen as the harbinger of a crisis.

The third quarter was marked by a coup attempt in July, economic introversion and declining production. In September, international credit rating agencies cut Turkey’s rating to “junk,” citing serious risks in economic indicators as well as in domestic and foreign politics. External headwinds worsened the outlook further as the US Federal Reserves’ appetite for rate hikes drew global investors away from emerging economies, including Turkey. The dollar began to appreciate fast as it moved from emerging to developed economies, which meant that local currencies were losing value. Because of domestic fragilities, the Turkish lira depreciated more than its peers did.

In short, a crisis was looming on the horizon, and the government had to act fast as the economic downturn coincided with the run-up to a critical constitutional referendum on April 16. Managing the crisis became a primary issue.