A recent drop in coronavirus cases may not be enough to lure tourists back to Turkey’s shores, darkening prospects for the nation’s current-account balance and the battered lira.
President Recep Tayyip Erdogan declared a partial lockdown last month until May 17 in an effort to salvage the tourism season and the flow of hard currencies it brings. While daily new cases are down about 75% from a mid-April high to about 15,000, the drop may have come too late, with Russia suspending flights to Turkey until June and U.K. adding the nation to its travel red list.
“Europe is shut, Russia is shut. Where will all those tourists come from?” asked Serdar Karcilioglu, head of an association of hotel executives in the resort town of Bodrum. “If the government doesn’t give financial support to the industry, tourism facilities will be taken over by creditors.”
The government is targeting 30 million tourists this year, almost double the figure in 2020. It’s aiming for revenue of $23 billion, after tourism income dropped 65% last year to $12.1 billion as global travel ground to a halt. In 2019, before the pandemic struck, 52 million tourists visited, generating about $35 billion in hard currencies.
The drop in tourism has clobbered Turkey’s current-account, whose 12-month rolling deficit reached $37.8 billion as of February, compared with a surplus of $3.76 billion a year earlier. The central bank will publish March data on Tuesday.
‘Fair Value’
The Institute of International Finance raised its “fair value” for the lira to 9.5 per dollar last week from a previous estimate of 7.5, citing a bigger-than-expected widening of the current-account shortfall. High gold imports and weaker tourism revenue mean the deficit may equal 4% of gross domestic product this year, IIF economists including Robin Brooks and Ugras Ulku said in a May 6 note.
“Earlier this year we were talking about whether tourism could kick off in May. Now we’re talking about July,” said Ahmet Arslan, the tourism coordinator at Aktarli Group, which operates hotels.
Domestic tourism may not be able to save the industry, as many Turks “lost their jobs, had to tap their savings or they simply wouldn’t want to spend money,” Arslan said.
Bloomberg