A notable aspect of the crisis-hit Turkish economy in recent months is the improvement in exports and tourism, which, along with increased public spending, has helped limit the second-quarter contraction to 1.5%. The uptick, however, has come at a price, with exporters and the tourism industry cutting prices, atop the sharp depreciation of the Turkish lira.

The July-September period is likely to mark the fourth quarter in a row that the Turkish economy has shrunk in year-on-year terms. The plummeting of investments has been the primary driver of contraction, followed by the decline in household spending or private domestic demand. Though the ruling Justice and Development Party refuses to use the term “crisis” for the current state of the economy, the country’s gross domestic product (GDP) has decreased 1.1% over 12 months. In terms of dollars, GDP has plunged to $722 billion, a far cry from the $950 billion in 2013. 

Nevertheless, the contraction in the past 12 months has been less severe than in Turkey’s two previous big crises in 2001 and 2009. Two factors have contributed to avoiding a steeper downturn — a rise in government spending, driven by local elections earlier this year, and an increase in exports and tourism revenues.

A closer look at the exports and tourism data, however, shows that the easing impact on contraction has come at the expense of offering cheaper prices to foreign customers.