A suicide bomber killed 10 tourists in Istanbul’s historical centre. Moreover, in December 2015 Russia adopted sanctions against Turkey, affecting tourism, construction firms and food exports, in response to the downing of a Russian aircraft (in the context of the conflict in Syria).

Impact on country risk

The suicide bomb attack targeting tourists and the Russian sanctions are a serious drawback for the tourism sector in Turkey. This is likely to lead to a widening of the current account deficit – which narrowed last year thanks to low oil prices – as tourism revenues account for more than 10% of the current account receipts. The increase in current account deficit is a concern as Turkey financed its current account deficit by short-term capital inflows rather than by long-term investments. In the context of volatile markets, this is likely to weigh further on the Turkish lira, which is already under severe pressure. As a consequence, the commercial risk remains elevated not only as the cost of reimbursing debt denominated in foreign currency is on the rise but also as the corporate debt burden has increased rapidly in recent years.


Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com