Russia-Ukraine conflict batters Black Sea tourism

Friday, February 25, 2022

Turkey is facing a tough balancing act in the Ukraine-Russia crisis as it has good ties with both and worsening of the standoff bears risks, as its Black Sea neighbors are also among its most important economic partners. Not only that, other tourist attractions near Black Sea see an effect in tourism and travel industry.

Ankara has swiftly reacted and criticized Russia’s decision this week to recognize two breakaway regions in east Ukraine as independent. But it stopped short of announcing any punitive measures. The threat of war between the two countries carries the potential to harm Turkey’s economy, given its deep energy, defense and trade relations, while both markets are its crucial tourist sources.

The current risk has the potential to negatively affect Turkey’s inflationary balances, said Enver Erkan, chief economist at Istanbul-based Tera Yatırım.

Turkey is in a unique bind: It has close relations with both Ukraine and Russia but also opposes sanctions in principle. Moscow’s move has prompted swift backlash and sanctions from Western powers, although they fell short of expectations.

President Recep Tayyip Erdoğan on Wednesday said Turkey could not abandon its ties with Russia or Ukraine, given its close economic links, among others.

Speaking to reporters on a flight back from Africa, President Recep Tayyip Erdoğan repeated his offer to mediate between Russia and Ukraine and said NATO member Turkey would take steps that do not harm its bilateral ties. The crisis leaves Ankara balancing those relations while also protecting its economy.

Any prolonged Russia-Ukraine conflict could lower tourist flows to Turkey this summer, assuming Russian and Ukrainian tourist arrivals stay the same as in 2021 or dip a bit. Some 4.7 million Russians and 2.1 million Ukrainians arrived in Turkey last year, according to the Culture and Tourism Ministry data. They accounted for 27.34% of the total 24.7 million foreign tourists that arrived throughout the year. The share jumped from 24.55% in 2020 and 19% in 2019.

The Turkey’s tourism revenues doubled to almost $25 billion (TL 345 billion) last year and the standoff constitutes risk as the country expects the income to match that of 2019, when it stood at $34.5 billion.

The negative impact on tourism revenues may further strain Turkey’s foreign exchange needs, Erkan said. With the rising geopolitical risk, the expected inflow of foreign exchange from the tourism sector may fall below expectations and the negative pressure on the lira may increase in the short term,” he noted. The Turkish lira has been broadly stable since the start of the year following a 44% decline in 2021.

The currency has been hovering around 13.5 against the U.S. dollar since hitting a record low of 18.36 in December.

It weakened as much as 1.5% against the dollar on Tuesday, nearing its weakest level since mid-January, on concerns over economic fallout from the Ukraine-Russia standoff, including for the country’s tourism sector.

It slid as far as 13.9 before trimming its losses to 13.85 during the day. It traded at 13.80 as of 1:40 p.m. local time on Wednesday.

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