Turkey's soaring inflation, plunging currency, surging interest rates, and a collapsing stock market, has ended almost two decades of stable economic growth and the "good life" for Turkish consumers that started in 2001. Now, the greatest threat facing Turkey is a structural one: its desperate need for foreign financial resources. 

A stable economic environment combined with easy access to global liquidity provided Turkey with abundant foreign resources. 

The decade of expansionist monetary policies of the Federal Reserve and the European Central Bank enabled countries like Turkey to obtain cheap foreign resources and endowed Turkey with a rate of about 5% stable growth.

From 2003-2008, Turkey registered an annual growth of 5.9%. From 2009-2017, the rate of growth was 4.9% per year.

However, after 2014, there were signs the stable growth party was coming to an end. External expansionist policies were nearing an end and interest rate hike cycle was imminent. 

From 2014 to the end of 2017, Turkey was able to prolong the business cycle but was severely damaged in the emerging market meltdown of 2018. 

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According to the Central Bank of the Republic of Turkey's balance of payments figures, in the first three quarters of 2018, there were no financial resources available from abroad, while $4.2 billion of foreign funds fled the country. 

During the high growth period, about one-fourth of foreign resources were used in the form of mortgages, auto loans, and credit cards, according to Al-Monitor. 

Consumer loans were the economic miracle that kept domestic consumption alive, but it forced low-income families into insurmountable debts. 

In 2004, consumer credit and borrowing on credit cards constituted 4.6% of the annual national income, which was 24% of total bank credits. By 2013,  the percentage jumped to 18% of the national income, making up 31% of total bank credits. Al-Monitor explains the debt crisis brewing in Turkey:

"After 2014, household debts began to broadcast serious warning signs, as banks were not able to collect on the loans. The AKP regime realized it had to impose some restrictions and insurance rates went up. Until 2017, growth based on domestic demand was the most prominent leverage of the system. It enabled about 19 million unorganized, non-unionized workers to live on loans. According to the Confederation of Revolutionary Labor Unions, or DISK, 66% of workers were earning below $365 a month. Since it would be practically impossible to survive on that income, it was obvious that households were adding to their incomes with easily available credit.

This way of balancing the family budget became more difficult in mid-2018. Consumer inflation was amplified by a rapid increase in foreign currency parity and abnormal tensions with the United States. It became imperative to increase Turkish currency interests, thus further increasing consumer credit and credit card borrowing. The interest rate for housing loans went from 13% in the first quarter of 2018 to 29% in November. More importantly, more households were taking out bank loans to pay credit card debts, with interest rates reaching 37%. According to the Financial Stability Report issued by the central bank in May 2018, bank debts and credit card borrowing had reached about $153 billion, making up 56% of household debts.

Turkey’s low and middle income laborers, white collar workers and retirees were severely pressed in paying back their debts. Facing serious delinquencies in paying back the household credits, many debtors began facing legal actions because of their arrears. According to data issued by the Union of Banks of Turkey, 1.1 million people faced legal action in 2017. In the first nine months of 2018, this figure reached over 3.2 million debtors. Banks could not collect about $3.5 billion, or 21% of the debts."

As of recent, headline economic indicators suggest the Turkish economy is set for a painful recession, despite the government asserting the economy is merely “rebalancing.” 

Turkish banks are now panicking that nonperforming consumer loans are set to explode in 2019. 

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Some debtors may lose their jobs in the next economic downturn. Those who keep their jobs may not make enough money to cope with high inflation, which means the consumer base, after a near two-decade party, is about to experience a horrible deleveraging period.