The fallout from this weekend’s Turkish coup attempt will hurt the country’s consumers and companies, especially those in the tourism field, analysts say.
The coup attempt “highlights deep political fractions in the Turkish economy”, said Ketaki Sharma, the founder and chief executive of Algorithm Research, a Mena and India-focused research company in Dubai.
Ms Sharma said the coup attempt will damage the Turkish economy in two main ways – by reducing domestic consumption and tourist arrivals amid political uncertainty, and by making it harder for companies to obtain financing.
According to figures for May, visitors from Russia were down by 92 per cent. Russia has been the country’s second-biggest source market for tourists, but relations between the countries were chilled after Turkey shot down a Russian fighter jet near the border with Syria on November 24.
Analyst company Oxford Economics has predicted that Turkey’s dwindling tourism sector will shrink by 5 per cent this year and 5.4 per cent next year.
Turkish Airlines, perhaps the country’s most high-profile company, is expected to bear the brunt of the economic fallout from the coup attempt, according to analysts. The company is attempting to carry out an aggressive plan to turn Istanbul into a global transit hub that connects the Americas, Europe and Asia.
In 2018, a new airport is to open in Istanbul that will serve more than 80 million passengers in its first phase, with plans to reach 150 million at a later stage.
“Turkish Airlines unfortunately will face the heat from this,” said Mark Martin, the chief executive of Martin Consulting in Dubai.
“Should events that follow the military coup be linked to regional instability and the state detaching from the country’s leadership, it is likely that Turkish Airlines may face both financial and market share retardation.”
Even before the coup attempt, the airline, which derives 60 per cent of its revenue from transit passengers, was still recovering from an attack on its hub barely two weeks ago. On June 28, 41 people died and another 239 were wounded when suicide bombers attacked Istanbul’s Ataturk airport.
Meanwhile, many carriers have suspended or limited flights to Turkey.
Emirates cancelled flights to Istanbul on Saturday and said it would continue to “closely monitor the situation” before a decision is made regarding later flights and flights to Istanbul’s second airport, Sabiha Gokcen.
Etihad said it had cancelled all flights to the Istanbul airports on Saturday.
Qatar Airways said on Saturday afternoon that its flights to Istanbul had resumed, but service to Ankara remained discontinued.
The IMF said in April that Turkey’s economic growth would slow from 4 per cent last year to 3.8 per cent this year, 3.4 per cent next year and 3.5 per cent in 2018.
“For an economy that depends on external savings to plug its current account deficit, a military coup makes the nation even more vulnerable to economic shocks at a time it can do without one,” Ms Sharma said.
* with additional reporting by agencies
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