Turkey's economic crisis only just begun – Peterson economist says

Turkey is only at the beginning of an economic crisis, at least for the country’s embattled middle class, U.S.-based economist Jacob Kirkegaard said.

Turkish corporations face bankruptcy and so might some of the nation’s banks without a significant increase in the value of the lira, Kirkegaard, a senior fellow at the Peterson Institute for International Economics, told Voice of America's Turkish edition in an interview.

The government has chosen economic pressure, epitomized by an anti-inflation program that involves companies cutting prices, showing that it has no other tools left to tackle surging inflation, Kirkegaard said. Inflation, currently at 24.5 percent, is expected to remain high for a long time, eating into consumer spending power, he said.

Turkey’s lira has strengthened against the dollar in the past week. It traded at 5.57 against the U.S. currency on Thursday after hitting a low of 7.22 in August. The currency is rising after a Turkish court released U.S. pastor Andrew Brunson from jail six days ago.

The only way to restore investor confidence in the country is to knock on the door of the International Monetary Fund and secure new funding, Kirkegaard said. But that will necessitate political cost including good relations with the United States and European Union, a step Turkish President Recep Tayyip Erdogan is unwilling to take.