Turkey under strain from sanctions, falling tourism

Turkey is being hit by ever-increasing bad loans due to Russian sanctions and shrinking tourist visits, warns emerging markets specialist, Constantine Courcoulas; he particularly noted the deepening corporate distress in the country, which he said was making it harder for firms to pay down debts. As we previously noted, Turkey's Deputy Prime Minister Mehmet Simsek warned in January that the country will lose at least $3.1bn worth of trade in 2016 due to Russian economic sanctions.This latest analysis also comes as it is reported that President Erodgan was instrumental in the country's biggest selling newspaper, Zaman, being taken over by the state virtually at gunpoint with no explanation on Friday, thereby further increasing political concerns in the country.

He specifically pointed to deepening corporate distress in Turkey, which he said "makes it harder for companies to pay down debts."

"The rise in bad loans is compounding the challenges facing Turkey's $814 billion banking industry as a combination of currency depreciation, Russian sanctions and waning tourist visits," Courcoulas pointed out.

He quoted Apostolos Bantis, a Commerzbank credit analyst in Dubai as saying that "the trend is likely to increase and intensify."

"While I don't see the situation running out of control, the impact of Russian sanctions and the blow to the tourism industry… will all take a toll on the corporate sector," Bantis said.

He was echoed by Cagdas Dogan, an analyst at BGC Partners in Istanbul, who warned of the far-reaching consequences of Russian sanctions and scarce tourist visits, according to Courcoulas.

"The worst may not be over for the industry, as tourism companies will contribute to a deepening of the bad-loan quandary," Dogan said.