Political instability and armed insurgency in Turkey's southern and northern neighbors, primarily Iraq, a country that is the second largest export destination for Turkish products, have taken a toll on Turkey's trade.
"The geopolitical developments in our immediate neighborhood have started to have impact on our exports," Turkey's economy czar and deputy Prime Minister Ali Babacan has warned.
Pointing out that Turkish exports have seen its exports to Ukraine, Russia, and the Middle East countries declining because of their sluggish domestic demands, Babacan recognized that Turkish companies have also been fending off problems in transportation and logistics in export routes.
He predicted that in the worst-case scenario, this may shave off half percentage point in the growth performance of Turkish economy for which he claimed it can be manageable.
Turkey expects a 4-percent economic growth rate this year but may fall short if the export markets go down even deeper.
Earlier this week, Turkish Central Bank also pointed out at difficulties in Iraqi market by saying that it has raised risks for Turkish economy and its chronically high current account deficit.
The Monetary Policies Board of the Bank stated that Turkish economy benefited from the slack recovery of world export market in the second half of the year, but issued warning that Iraqi market needs to be closely watched because of risks associated for Turkish export products.
The most impacted by crisis in Iraq is the local industry in Turkey's southeast where the main export products go to either Iraq or through Iraq to the Gulf countries. The local industry has suffered as much as 30 percent in sales to Iraqi market alone.
Southeast Anatolia Exporters' Union President Abdulkadir Cikmaz said that local exporters are scrambled to find alternative routes to customers in Iraq, underlining that the loss in exports to Iraq from the region at one-third of previous sales.
Overall, Turkish exports to Iraq dropped by some 20 percent with compare to the same period last year. According to the exporters' advocacy group TIM, the decline has reached to 30 percent in a month from June 15 to July 15.
Turkey exported 12 billion U.S. dollars worth of goods to Iraq in 2013.
The impact of problems in the troubled neighbors of Turkey has gone beyond the local industries across the border provinces.
The Western province Izmir's Trade Chamber deputy chairman Yalcin Yilmaz said crises in Ukraine and Iraq has negatively influenced export performance especially in agricultural products.
Expressing his disappointment in poor performance of agricultural exports to Iraq, Ukraine and Russia, Yimaz stated that the industry might end up the year 2014 with lower performance than the one recorded last year.
He asked the government to seek alternative markets for Turkish exports.
According to a report issued by Turkey's main opposition Republican Peoples' Party (CHP), the turmoil and chaos in Iraq may cost Turkey some eight billion U.S. dollars in trade loss.
Stressing that half of Turkey's exports through land transportation goes to the Middle East, primarily Iraq, the report said the decline in exports to the region would adversely affect the transportation industry as well.
The Gaziantep Chamber of Transporters has already reported that Turkish truck drivers are not willing to carry goods to Iraq because of the danger Islamic State of Iraq and Levant (ISIL) poses in the region.
The chamber chairman, Zafer Aydinguler, said that drivers are worried for their safety and do not want to carry anything to Iraq after 32 Turkish truck drivers were abducted by ISIL on earlier last month.
"We cannot transport any goods to the Iraqi region because of safety fears. This creates a big problem for everybody who exports goods to the region," he said.
The CHP report cited drop in the demand for Turkish construction and contracting industries in Middle East as another concern.
It concluded that the Iraqi crisis might bring additional one percent GDP burden on current account deficit of Turkey, which is equivalent of some eight billion dollars.
If the Iraqi crisis worsens with significant rise on world oil prices, the Turkish economy, which is almost totally dependent on outside energy resources, may be impacted further, raising Turkey' s fuel bill.
Iraq is the second-largest oil producer among the Organization of Petroleum Exporting Countries. Its almost 150 billion barrel oil reserve makes up 9 percent of the world's total oil production. The instability with militant factions seizing cities and towns in Iraq may raise oil prices.
According to a report by Suleyman Sah University in Turkey, current developments in Iraq may negatively affect both crude oil prices and Turkey's foreign trade.
The report suggested that each one-dollar increase in oil prices will put an additional 300 million dollars' burden on the Turkish economy, which will reflect on the current account deficit and inflation levels.
The real changes in prices will start when the ISIL militants start advancing towards the southern parts of the country where most of Iraq's oil fields and production facilities are located, the report hinted.
This is why ISIL's capture of Mosul in the north did not affect oil prices in the beginning. The drop in exports is also expected to take a toll on jobs in Turkey with unemployment figures are at risk of rising.
