Turkish Economy Hit by Russian Tourism Decline

Source: DHA

Source: DHA

On 19 January 2016, The Telegraph’s Travel published its list of World’s Most Visited Countries in 2015 and Turkey ranked 6th in this list with a visitor number of 39.3 million.

Despite this fact, the overall level of tourism fell by 0.9% from the previous year. Macroeconomic factors such as the slowdown in Europe and a decrease in purchasing power due to the fall in commodity prices for Russia were influential; however the most decisive factor has been the decline in Russian tourism following Turkey’s downing of Russian warplane.

Prior to the attack, Russia was going through a difficult period due to falling oil prices and the strengthening of the US dollar. The Russian Ruble was devalued and traded at around 70 against US dollar, which made the purchase of foreign goods and services expensive.

In addition to this slowdown in the Russian economy, on 24 November 2015, a Russian Sukhoi Su-24 was downed by the Turkish army for violating Turkish-Syrian border.

Russia’s immediate reaction was cancellation of economic ties with Turkey, banning all products exported from Turkey. The second step was the ban of tour sales, which directly hit Turkey’s tourism sector.

At least for the last two years, Russian tourists have had a crucial place in Turkish tourism. During the high season, almost half the tourists who visited Turkey have been from Russia.

For the first time in the last two years, the share of Russian tourists in the total number of tourists visiting Turkey fell below 10%.

Considering the size of Turkey’s tourism revenue, which is 4.5% of USD 800 billion GDP, the Turkish Prime Minister Ahmet Davutoğlu announced a precautionary measures package, mostly based on cash subsidies to travel agencies bringing tourists to Turkey, debt restructuring, loan facilities and other fiscal support.

The net effect of the package is currently questionable, and combined with rising security worries, Turkish tourism will be increasingly vulnerable this year.

A simple comparison highlights the severity of the situation. Last year in February, 128,810 tourists visited Antalya, a favorite holiday spots in Turkey, whereas this number dropped to just 78,100 in 2016, with only 55 Russian tourists visiting Antalya this year.

Although the income statement of the tourism companies will be affected adversely, the subsidies will compensate a portion of the potential damage. Furthermore, if the stall in the sector persists, the loss in income by these companies will shrink the tax base.

Combined with the subsidy commitment by the Turkish Treasury, a dent in the budget can be foreseen for the fiscal year ending 2016.

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