The crisis threatens to derail the country’s fast-growing economy and cause deep divisions among its citizens along religious and secular lines. This comes at a time when five years of robust economic growth is slowing and concern over Turkey’s ballooning current account deficit is increasing.

Spending on household appliances in Turkey dropped 8.3% in the third quarter and 6.3% in the fourth quarter of 2006, according to the Turkish Statistical Institute. Domestic motor vehicle sales slumped 29.8% in March 2007 for the 10th consecutive month, the Automotive Manufacturers Association said. Interest rates on consumer loans increased sharply in May 2006 following fluctuations in global currency markets. Interest rates have yet to return to pre-crisis levels.

Advertisement

Manufacturers of durable consumer goods and motor vehicles – automobiles, commercial vehicles and agricultural tractors – are turning to exports to increase production and avert a recession. In the first three months of this year, Turkey’s exports reached $23bn, up 25.1% from 2006, the Turkish Exporters Assembly (TIM) reported. TIM said Turkey’s exports could exceed $100bn this year, up from $85.9bn in 2006. Imports totalled $136.3bn in 2006.

Automotive industry exports, including passenger cars, commercial vehicles, agricultural tractors and automotive parts and components, have been the driving force of Turkey’s exports in the first quarter of 2007.

Political crisis erupted in Turkey when, on April 24, the ruling conservative Justice and Development Party named Islamist cabinet minister Abdullah Gül as its presidential candidate, sparking massive anti-government demonstrations and threats by the armed forces to topple the administration.