Turkey plunged into recession for the first time in a decade, trying to beat the strike against President Recep Tayyip Erdogan with the country heading to local elections next month.

The country’s gross domestic product (GDP) shrank by 2.4% in the previous quarter on a seasonally adjusted basis compared to the third quarter of 2018, the revised decline of 1.6%. On an annual basis, the economy shrunk by 3%. The economists expected a decline of 2.4% QoQ and 2.5% YoY.

Years of record monetary stimulus across the globe overwhelmed Turkish companies with capital infusion, and corporate credit rose more than double over the past 10 years. But almost continuous expansion, which led to an average growth of almost 7% in each quarter since the end of 2009, has fallen after the TRY collapse last year, followed by wrong policy moves, and unprecedented diplomatic disagreement with the United States.

The investors fear that Turkey will face a long way to recovery as the flow of foreign capital dries up, and households and companies pay off their debts. Turkish GDP per capita has dropped to 9,632 USD from just over 10,000 USD in 2017. The economy has grown by 2.6% for the whole year.

Analysts say there is a significant risk that recovery will be slower this time.

The Turkish lira fell by 0.5% after releasing the data. This is the third-lowest performing currency in emerging markets this year, with a loss of about 3% against the US dollar.

The decline of Turkey’s economic growth model is taking place at a sensitive moment for Erdogan, who became prime minister for the first time in 2003.

In an attempt to revive growth, the government has stepped up pressure on state-owned banks to increase lending, with annual lending being positive last month for the first time since August. The state recapitalized three of its creditors by selling bonds to Turkey’s unemployment fund and preparing a new plan to further increase the capital of state-owned banks.

So far, the prospects remain bleak. The GDP may continue shrinking in the first half of 2019, which will be followed by four quarters of weak growth averaging just under 3% on an annual basis.

While the central bank keeps interest rates high in order to stabilize the pound and stem inflation, the engine of the Turkish economy is failing. Real bank lending declined by 7.2% on a quarterly basis in the last three months of 2018.

Given the total debt, which is at 121% of GDP, the ratio of unsecured loans can grow to around 7% of the total this year by about 4%, according to a Morgan Stanley report in February, which refers to the guidance obtained by creditors. The World Bank in December set this figure at around 13%.

Industrial production reported in 2018 its biggest drop of more than 9 years, and economic confidence reached its lowest point since the crisis in 2009. The largest companies in Turkey have completed or are looking to restructure loans for 24 billion USD.