The number of companies classified as newly formed in Turkey rose by 5.9% y/y to 4,584 in July, but more than 700 firms went out of business during the month, marking a 22.7% y/y rise, Union of Chambers and Commodity Exchanges (TOBB) data shows.

Most of the newly launched companies (2,635) operate in trade, while 1,062 are involved in manufacturing, according to the business group. Some 640 new construction companies were also established.

TOBB previously reported that in June the number of newly established companies declined by 17% y/y while the number of companies closed increased 4.5% on an annual basis.

It is difficult to explain why the tide for newly formed enterprises turned. The country’s statistical authority TUIK reported last month that the economic sentiment index declined by 3.3% m/m in July, while the business sentiment sub-index fell 3% m/m.

Earlier this month, Rifat Hisarciklioglu, head of TOBB, called on private lenders to provide more loans and cheaper loans to small and medium sized companies, following the central bank’s delivery of a 425 bp cut in its main policy rate, the largest reduction made in at least 17 years.

In the first seven months of 2019, some 6,700 companies closed their doors, marking a 4.8% increase from a year ago, while the number of newly launched firms dropped 11% to 47,173.

NPLs to tourism industry rise
Separately, the non-performing loans (NPL) ratio in relation to Turkey’s tourism industry rose to 4.21% in June from 3.85% a year ago as costs continued to increase and per capita tourist spending remained low, Sozcu daily reported, citing data from the Mediterranean Touristic Hoteliers Association (AKTOB).

Loans to the Turkish tourism industry declined by 18.4% y/y over the same period while the NPLs in the sector amounted to Turkish lira (TRY) 2.9bn (€451mn).

Overall costs at local hotels showed a 25.8% increase on an annual basis in July, well above the headline annual inflation rate of 16.65% in the month. For instance, fresh fruit and vegetable prices surged 36% y/y, energy costs climbed 26% y/y and drinks prices rose 25% y/y.

But at the same time hoteliers failed to increase their revenues from foreign tourists. Per capita tourist spending was only $625 in June, the newspaper said.

AKTOB data also showed that on average $1.8bn is invested to build new hotels in Turkey each year, creating around 21,000 new jobs. Some 47% of all new investments go to 5-star hotels.

Another $4bn is spent on renovation and upgrade work—again 5-star hotels take the lion’s share of investment, at 44%.