Slow growth in tourism revenues gives rise to Turkish deficit fears

ANKARA (Reuters) – Low revenue growth for Turkey’s key tourism sector this year is fanning fears of a wider-than-expected current account deficit, proportionately one of the biggest in emerging markets. In the first six months of the year, the number of foreign visitors rose 16.6 percent to 12.8 million but revenues grew a mere 3.4 percent to $5.89 billion. «This is going to affect the current account deficit negatively. We have cut our projection for tourism revenues to $15.2 billion from $16.15 billion for 2007,» Garanti Bank’s head of research Ali Ihsan Gelberi said. Tourism is a crucial foreign currency earner in Turkey and helps to offset the current account deficit, which stood at $19.6 billion in the first half of this year. Economists say financing the deficit can be a problem when global liquidity dries up amid fears of a credit crunch on global markets. Government officials have said revenues may exceed $18.5 billion this year, but economists said this was not possible. «Given the dismal growth in tourism revenues in first seven months, tourism’s contribution to the current account might turn out to be significantly smaller than we had expected,» Finansbank said in a research note. A strong lira currency, the emergence of all-inclusive hotels in Turkey and tough competition from other tourism destinations have curbed the rise in revenues. Sector representatives said that although the industry has rebounded strongly this year, it was still feeling the impact of last year’s fall when bird flu and bombs scared off tourists. «The hotel prices for this summer were fixed last year and it will take time before we see growth in tourist numbers also reflected in revenues,» Riza Epikmen, vice president of the Turkish Association of Travel Agencies, told Reuters. Last year, the number of tourists fell 6 percent to 19.8 million but Turkey expects the number to rise to 23 million visitors this year. A foreign tourist visiting Turkey’s Mediterranean coast spends $400 on average but this rises to $1,000 in Istanbul, a city rich with historic sites and an emerging center for lucrative international conventions. Poor infrastructure and limited spending opportunities were also behind low revenues from a mass sun-and-sand tourism industry. «At all-inclusive hotels, tourists do not go out and spend. But they can spend more if we provide regular bus trips to the cities and a diversity of products,» Epikmen said. Competition with other tourism destinations, such as Egypt as well as Spain and Greece, has also curbed prices in Turkey. Hoteliers said an extreme heat wave also played a role in the stagnant revenues but Epikmen was optimistic for next year. In 2008 value-added tax for the sector was set to be cut to 8 percent from 18 percent.