In April, Turkey was the fastest growing economy in the G20, fuelled by policy stimulus from the Central Bank in the wake of the attempted coup in 2016, according to the International Monetary Fund in a report.
However, the IMF warned in the same report, as it had done previously, that Turkey was at risk of overheating, given its economy faced "internal and external imbalances: a positive output gap, inflation well above target, and a current account deficit of more than 5% of GDP".
Erdoğan has denied that his country has structural economic issues and has vowed to curb the independence of Turkey’s central bank in order to stop it stepping in to curb the country’s inflation and address its falling currency.
Investor confidence in the country has been in decline since May, and slumped further in June, after Erdoğan consolidated his power in elections and appointed his son-in-law as finance minister.
Nevertheless, investors had been willing to bet on Turkey without agenda in early 2018 and throughout the year they have told GlobalCapital that their reticence about deploying cash in the country would reverse if rates were hiked and economic reforms made.
As recently as January, Turkey was set to be the star of the EM IPO market with a huge pipeline of deals set to be put in front of international equity investors and run primarily by global, and in most cases American, banks.
Investors and markets have turned on Turkey for economic reasons and until this month, even Erdoğan's staunchest advocates would have struggled to justify his claims that foreign investors had an agenda against his country and were waging economic warfare against it, for political reasons.
That was until US president Donald Trump decided to prove Erdoğan's point and sanction Turkey over the detainment of an obscure US pastor, who is under house arrest for supposed involvement in the attempted 2016 coup.
The reason behind Trump’s sudden decision to sanction Turkey over Brunson — arrested in 2016 — is unclear, but his gleeful tweeting last week about the fall of Turkey’s currency and markets has provided the fuel needed to give Erdoğan's conspiracies credibility.
He can now continue to claim that Turkey’s fall from grace is the result of investors being drawn into a malign international scheme to undermine Turkey, not because of his own government’s policies.
Trump has saved Erdoğan from having to retreat from his economic position to retain domestic confidence, by giving him the perfect international bogeyman.
Turkish press has reported that Erdoğan has recently reached out to Russia and China for support and Turkey has signed a currency swap deal with Qatar to stem some of the pressures on the lira.
Financial support from Russia, China and Qatar — all opposed strategically to the US and Trump — could provide Erdoğan with another short-term fix and delay the need to address the fundamental issues facing its economy.
Trump's decision to sanction Turkey and his subsequent tweets have given Erdoğan an excuse to continue to vilify foreign markets in order to cover up for his own fiscal shortcomings, and he has inadvertently strengthened Turkey's autocratic president.