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Airport attack hits Turkey tourism industry when it's down
[ISTANBUL] The worst may not be over for Turkey's troubled tourism industry.
The deadly bombings that struck late on Tuesday could derail improvements that had been expected to follow President Recep Tayyip Erdogan's efforts to mend relations with Russia and Israel. At least 41 people died and more than 200 were wounded.
Attacks attributed to Islamic State, blamed for Tuesday's bombings, and Kurdish groups have struck major Turkish cities this year, damaging an industry that employs 8 per cent of the workforce and owes US$17 billion to banks.
Here's the story of a difficult year for Turkish tourism:
Data published on the morning of the attacks already signalled a grim outlook. Tourist arrivals not only fell in May for a record 10th month, but as hotels and resorts enter peak season, the slump deepened. Arrivals plunged 35 per cent from the same month of 2015, after a 28 per cent annual drop in April.
The industry is headed for a 35-40 per cent drop in income in 2016, Basaran Ulusoy, the president of the Association of Turkish Travel Agencies, said by phone.
"We've got to nurse our wounds this year and look ahead to 2017," he said.
Aviation stocks reflect how the Istanbul bombings sunk optimism that Mr Erdogan's diplomatic forays to enda six-year rift with Israel and a more recent standoff with Russia would fill hotel rooms.
Russia used to send the second-largest contingent of foreign visitors to Turkey, after Germany. But traffic tailed off after Turkey shot down a Russian fighter jet in November and President Vladimir Putin ordered economic sanctions in punishment, including a ban on charter flights. The latest data show Russian visitors plunged an annual 92 per cent in May.
Airline shares surged on Monday as Mr Erdogan extended an olive branch to his Russian counterpart but those gains were eroded Wednesday, extending Turkish airlines stocks' year-to-date losses to 21 per cent. Russia today said it plans to lift its curbs on tourism to Turkey and vowed to resume cooperation.
None of this bodes well for one of Turkey's biggest weaknesses: Its current-account deficit. While the shortfall has narrowed since 2011, largely due to the slump in energy prices, the economy still relies heavily on foreign cash to finance growth at home, leaving it vulnerable to swings in investor sentiment.
Economists surveyed by Bloomberg expect the deficit to start widening again this year, climbing back to 5.1 per cent of gross domestic product by 2018. Losses from tourism income will at least double in the summer months, according to Ozlem Derici, an economist at Deniz Investment in Istanbul.