The coronavirus pandemic could cause a loss of $4 trillion to the global economy for 2020 and 2021 because of struggles in international tourism. Losses are steeper than forecasted. Developing countries suffer the most.
The report published on June 30 by the United Nations Conference on Trade and Development estimates that the COVID-19 pandemic could cause a US $4 trillion loss from international tourism. That’s a year of Germany’s gross domestic product, the fourth largest economy in the world.
In 2020, international tourist arrivals declined by 1 billion, which accounted for a 74% decline. Between March and December 2020, inbound tourism was reduced by 84% and the first quarter of 2021 followed the same trend.
The steep drop in international tourism in 2020 already made a loss of $2.4 trillion for 2020. And the economic situation of the tourism industry may only improve by 30% despite the vaccines. The report doesn’t exclude that a similar loss of 2020 may occur this year since the estimated losses are between $1.7 and $2.4 trillion for 2021 compared to 2019. That’s between Russia’s and Italy’s GDPs, the 11th and 8th largest economies.
The estimates for the year 2020 were worse than anticipated. In July 2020, the UNCTAD had estimated that a 12-month lockdown could cost international tourism up to $3.3 trillion. The worst scenario was actually optimistic.
Developing countries benefit from international tourism’s money transfer
The inequities in vaccination rates between countries may further deepen the crisis among developing countries, which make up for 60% of gross domestic product losses. Regions the most impacted by the lack of tourism revenue are not North America or Europe, but Asia, Oceania and North Africa. The Caribbean region has been moderately impacted.
International tourists mostly come from rich countries, and traveling to developing countries acts as a transfer of money. For a country like the Maldives, inbound tourism accounts for 50% of total exports (international tourism is considered an export of services).
“In international tourism we are at levels of 30 years ago, so basically we are in the ’80s,” said Zoritsa Urosevic from the UNWTO. And international tourist arrivals similar to pre-COVID levels won’t be back before 2023 the report says. Tourism’s future may also look more local, as environmental concerns may further shift tourism towards domestic travel. It wouldn’t help developing countries in short-term economics.
In 2020, Mongolia suffered the most from the decrease in international tourist arrivals, with ‑89% compared to 2019. Then followed China (-88%), the Philippines (-84%), Thailand (-84%) or Nepal (-81%).
Morocco may have controlled the spread of the virus relatively well; opening borders between June and September was essential for the Kingdom. Five million Moroccans live abroad and many come back during summer holidays. The King of Morocco even demanded the aerial and maritime transportation industry decrease travel fares despite a cost of 2.5 billion DH (US $300 million) to the country.
The three countries that may lose the most in terms of revenue in 2021 are Turkey, Ecuador and South Africa. Turkey already suffered a 70% drop in international tourist arrivals in 2020 while they contributed to 5% of the GDP.
$1 from international tourists brings $2.5 of GDP in the country
Overall, the UN World Tourism Organization estimates that 100–120 million direct tourism jobs are at stake. In the context of an economic downturn, people may not find another job elsewhere in the short term. Developing countries like in Latin America already suffered the most from decreased household income, which is less supported by public policies than in rich countries.
Moreover, international tourism has indirect consequences on the demand on intermediate goods and services, such as in accommodation, transportation or food and beverage industries. Although the ratio varies from 1 to 4 according to the country, overall, the report estimates that $1 spent by international travelers in less incurs a $2.5 loss in GDP.
“The world needs a global vaccination effort that will protect workers, mitigate adverse social effects and make strategic decisions regarding tourism, taking potential structural changes into account,” UNCTAD Acting Secretary-General Isabelle Durant said.
But again, countries with the highest vaccination rates could lose 37% of revenue from international tourists while those, with low vaccination rates could suffer from a reduction of about 75% in tourism.
