LAST year Soner Tufan, straining to keep up with demand for guided tours around Istanbul, decided to move to spacious new offices. “Those were the days,” sighs Ali Emrah, his business partner. Despite running one of the top-rated tour-guide companies in Istanbul, they have seen daily inquiries about tours fall from 20 or 30 to three or four following a series of terrorist attacks in Turkey, the most recent on Istanbul’s main airport. Their expansion now feels like an error. Many tour guides, they say, are looking for new jobs.

Turkey’s tourism slump is already visible in deserted sights and empty hotels, but not yet in its economic statistics. Banks have restructured loans to the industry; non-performing loan ratios will begin to rise only next year, says Ozlem Derici of DenizBank. The impact on Turkey’s current account—last year revenues from tourism paid for half of Turkey’s trade deficit in goods—will become clearer as the summer wears on. Nihan Ziya-Erdem of Garanti Bank says the slowdown could shave as much as one percentage point off this year’s growth rate.

That is bad news for Recep Tayyip Erdogan, Turkey’s...Continue reading