The recession that is widely expected to hit Turkey by next year could shrink the country’s GDP from around to $850bn to $594bn, the lowest level recorded since 2006, according to Standard & Poor's.

The unprecedented drop in wealth would be a big material and psychological blow to the Turks who, as recently as 2013, were on the verge of having a one-trillion-dollar economy. As things stand, Turkey has the world’s 17th largest nominal economic output and 13th largest by purchasing power parity (PPP), according to the International Monetary Fund (IMF).

Meanwhile, jitters over escalating tensions between Nato allies Turkey and the US following their tit-for-tat sanctions exchange over Ankara’s refusal to release North Carolina pastor Andrew Brunson—on trial for what Washington says are contrived terror-related and espionage charges—were not helped by an incident on early on August 20 in which gunshots were fired at the US embassy in Ankara. US and American officials said there were no casualties. Three of six fired shots hit the embassy’s iron gate and window wall, the Ankara governor’s office said.

Anti-US sentiment is growing among Turks as the economic stress tightens. As the Brunson dispute mounted, US President Donald Trump on August 10 doubled the tariffs on aluminium and steel imports from Turkey, prompting Ankara to sharply hike tariffs on several US products and President Recep Tayyip Erdogan to call for a boycott on American electronics. The diplomatic standoff sent the already embattled Turkish lira (TRY) into freefall against the dollar, and raised anxieties that Turkey’s currency crisis may have reached such a degree that a debt and liquidity crisis is around the corner. The TRY is down by around 40% against the dollar in the year to date.

Erdogan’s words on an electronics boycott has led to some Turks destroying iPhones using sledgehammers, handguns, fire and other means, before posting videos of their exploits on social media.

‘Their goal is to bring us to our knees’
In a televised address at the weekend, Erdogan continued to deny that Turkey’s financial turmoil is down to its economic fundamentals. He repeated his claim that it is the result of an economic attack mounted by outside forces. “The attack on our economy has absolutely no difference from attacks on our call to prayer and our flag. The goal is the same. The goal is to bring Turkey and the Turkish people to their knees—to take it prisoner,” Erdogan said in the address.

“Those who think they can make Turkey give in with the exchange rate will soon see that they are mistaken,” he added.

Erdogan stopped short of directly naming any countries or institutions he said were behind the attack, but he has, in the past, blamed a shadowy “interest rate lobby”, Western ratings agencies and financiers.

To address the growing economic crisis, Turkey’s finance minister has announced what could turn out to be the country’s biggest fiscal tightening this century.

A German government spokesman on August 20 said it was up to Turkey to decide whether it wants to seek economic help from the IMF.

On August 19, Qatar and Turkey’s central banks signed a currency swap agreement to provide liquidity and support for financial stability, days after Turkey’s Gulf ally pledged $15bn in support.

The agreement will establish a two-way currency exchange line, the Qatar Central Bank said in a statement posted on its website.`

Qatar’s Emir this month approved economic projects, investments and deposits for Turkey. That gave a boost to the battered TRY.

The currency stood at 6.0972 against the dollar as of around 14:20 local time on August 21. That marked a weakening of 0.40%.