Turkey to Let Tourist Companies Delay Loan Payments on Slowdown

  • Prime minister proposes plan to delay $98 million of loans
  • Bad debt from industry growing amid terrorist attacks

Turkey plans to help tourism companies restructure bank debt after a series of bomb attacks and Russian sanctions curbed the industry’s growth and led to a rise in bad loans.

Under a government proposal, firms may be allowed to postpone repayment of 288 million liras ($98 million) of credit, Prime Minister Ahmet Davutoglu said in a televised press conference in Ankara on Monday, without giving details. Turkey will offer an additional 255 million liras of support to the industry as well as give tourism companies with annual sales of $700,000 or more access to benefits currently available to exporters, he said.

The rescue plan comes after a string of terrorist attacks in the country hobbled the $32 billion tourism industry and as non-performing loans rose to 3.09 percent of total credit in 2015, the highest ratio in almost five years. Russian President Vladimir Putin made matters worse for operators when he discouraged citizens from visiting Turkey following the downing of one of his fighter jets near Turkey’s border with Syria in November.

Share of loans to sector at highest since at least 2003

Source: Bloomberg, Banking Regulation and Supervision Agency

“Recognizing the problems the tourism sector faces given tensions with Russia and terrorism issues is a welcome move,” Cagdas Dogan, a banking analyst at BGC Partners Inc. in Istanbul, said by e-mail. “Support in the form of direct aid and loan restructuring could alleviate asset quality pressures in the banking system, which is building up.”

Stocks of companies in the tourist industry erased this year’s losses on Monday, with the Borsa Istanbul Tourism Index rising as much as 3.9 percent before trading 1.9 percent higher at the close in Istanbul. The latest terrorist attack in Turkey was a car bomb blast in the capital that killed 28 people last week. 

Turkiye Is Bankasi, the country’s largest publicly traded lender by assets, said its NPL ratio rose last quarter due to a single tourism loan. Financing to hotels and restaurants accounted for 2.85 percent of total loans as of the end of December, the highest since at least 2003, according to data compiled by Bloomberg.

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