In its heyday, years before the 2009 global financial crisis as well as in the ensuing years, when the United States and Europe pursued liquidity expansion to battle the crisis, Turkey’s ruling Justice and Development Party (AKP) enjoyed abundant inflows of foreign capital, with an annual average of nearly $38 billion for the past 14 years.

Those resources, however, were used mostly toward domestic demand, financing consumer loans and sectors that bring in no foreign exchange gains, such as construction. As a result, Turkey’s current account deficit became a chronic problem and its external debt stock, 40% of which is short-term, swelled to nearly 60% of the gross domestic product. In addition, inflation and unemployment in those years got stuck at 7%-8% and around 10%, respectively, while investments ground to a halt. Thanks to the global fall in energy prices, the current account deficit — $35 billion annually on average — did not widen, but did not recede either.

The US Federal Reserve’s decision to hike rates, the first signal of which came in 2013, led to occasional outflows of foreign capital, and the appreciation trend of the dollar began. Yet the Fed’s vacillations and the European Union’s zero-rate expansionist policies meant that foreign funds were willing to stay in emerging economies such as Turkey’s for some time longer. As a result, the fragile Turkish economy was able to stay on its feet, though the inward structural loss continued.

Turkey’s reliance on external funds had grown, but starting in the second half of 2013, foreign investors began to lose their appetite in Turkey, leading the Turkish lira to lose ground fast. The dollar’s appreciation against the lira since 2013 will be 60% by the end of 2016 if its rise this year is contained at the current 12%. Given that consumer prices have increased 25% in the same period, the economic structural loss caused by the rise of the greenback becomes plain as day.