Turkey's economy shrinks

The Turkish retail market is in the doldrums

The financial crisis that has gripped Turkey since the beginning of the year has had a dramatic effect on economic output.

The country's gross domestic product (GDP) fell by 9.3% year on year in the second quarter, official figures have shown.

The government and the International Monetary Fund (IMF) are aiming for a 5.5% contraction in gross national product - which includes money earned overseas - for the whole of 2001.

The second-quarter figure will add further fuel to the perception that Turkey's crisis has much further to run, despite recent increasing optimism from government and policymakers.

International aid

The IMF and the World Bank are lending Turkey $15.7bn to support a recovery programme built around a floating currency.

International investors have put Turkey in the firing line since fears emerged about the state's solvency earlier this year.

The collapse in sentiment caused an exodus of investors, which in turned has provoked slumps on the country's financial markets.

The government has promised to get its house in order.

Painful change

But change is proving painful. Since the Turkish lira was forced to float in February this year the currency has lost about half its value against the US dollar and an estimated 600,000 workers have lost their jobs.

In June, the IMF suspended its loan programme following allegations of government foot-dragging on agreed reforms.

The programme was restarted in July with the release of a loan tranche after one of the government's main opponents of the IMF plan was sacked.

Doubts remain, however, on the ability of Turkey's coalition government to push through painful reforms.

Opposition to IMF-mandated reforms has already caused considerable political unrest.