Global tourism could lose up to $3.3 trillion due to pandemic, UN says

For every $1 million lost in international tourism revenue, a country’s national income could decline by $2m to $3m

The global tourism sector stands to lose up to $3.3 trillion (Dh12tn) as the Covid-19 pandemic cripples international travel, with developing countries to suffer the biggest hit, according to the United Nations.

In the most optimistic scenario, international tourism could lose $1.2tn, or 1.5 per cent of global gross domestic product (GDP), after a four-month standstill due to the coronavirus crisis, the United Nations Conference on Trade and Development (UNCTAD) said in a report on Wednesday.

It examined the economic impact of the halt in tourism through three scenarios, depending on the duration of the global restrictions on travel, to quantify the effects on countries' incomes, trade and employment.

The sector could suffer a $2.2tn reduction as a result of an 8-month standstill in international travel. The worse-case scenario points to a dramatic $3.3tn loss from a 12-month pause, which is more than double the size of the international tourism industry.

"Many countries depend heavily on tourism and will experience dramatic effects in the labour market and national income," UNCTAD said. "Women are likely to be disproportionately affected due to a high share of female employment in the tourism sector. However, almost all sectors of the economies reliant on tourism are negatively affected due to the inter-sectoral linkages."

The tourism industry has borne the brunt of the damage unleashed by restrictions to contain the coronavirus as countries sealed their borders and airlines grounded their planes. The United Nations World Tourism Organisation (UNWTO) projects 850 million to 1.1 billion fewer international tourist arrivals, leading to a loss of $910 billion to $1.2tn in export revenues from tourism in 2020. The drop in demand will have severe consequences for employment levels.

Countries that are highly reliant on tourism or have less diversified economies will suffer the most, according to UNCTAD.

Jamaica, where the tourism industry accounts for 20 per cent of GDP, stands out with a loss of 11 per cent in GDP, according to the report.

Thailand is among the worst hit countries with a 9 per cent loss in GDP, followed by Croatia, Portugal and the Dominican Republic, which record losses of 9 per cent, 8 per cent and 6 per cent respectively.

Other tourism hotspots such as Kenya, Egypt and Malaysia could lose over 3 per cent of their GDP, the report showed. China and the US, the world's biggest economies, face the largest declines in absolute terms.

The US incurs the highest losses with a drop of $187bn in GDP in the best-case scenario, while China faces a loss of $104bn in GDP.

Major tourist destinations such as Thailand, France and Germany stand to lose approximately $47bn each in GDP due to the contraction in tourism.

Coronavirus-induced losses in tourism have a knock-on effect on other economic sectors that supply the goods and services travellers seek while on vacation, such as food, beverages and entertainment.

Therefore for every $1 million lost in international tourism revenue, a country’s national income could decline by $2m to $3m, according to UNCTAD estimates.

"Intersectoral linkages worsen the impact of a decline in tourism. A fall in tourist arrivals has a negative impact on the suppliers to hotels, food and recreational activities," the report said. "It is these intersectoral linkages and corresponding losses which lead to the large indirect losses when the tourism sector contracts."

Countries heavily dependent on tourism, a major employer in many countries, could see a loss of 10 per cent of unskilled jobs in the most optimistic  scenario and  more than 40 per cent in the worst-case scenario, the UNCTAD found.

The worst affected countries are Thailand, Jamaica and Croatia. In the most extreme case, employment falls 44 per cent in Jamaica if the entire tourism sector is stopped for 12 months.

Women are more likely than men to be entrepreneurs in tourism and make up about 54 per cent of the workers in the accommodation and food services sectors.

“This is why women are particularly hard hit in this crisis. And this is why policies that help protect the sector also protect the economic empowerment that many of these women have long fought for,” UNCTAD's director of international trade, Pamela Coke-Hamilton, said.

The UN agency called for stronger social protection in the affected countries to prevent the worst economic hardship for people and communities that depend on tourism.

It urged governments to protect workers. Where some enterprises are unlikely to recover, wage subsidies should be designed to help workers move to new industries, UNCTAD said.

Governments should also assist tourism enterprises facing the risk of bankruptcy, such as hotels and airlines. Financial relief may include low-interest loans or grants.

The agency also called on the international community to support access to funding for the hardest-hit countries.

“These numbers are a clear reminder of something we often seem to forget: the economic importance of the sector and its role as a lifeline for millions of people all around the world,” Ms Coke-Hamilton said.

“For many countries, like the small island developing states, a collapse in tourism means a collapse in their development prospects. This is not something we can afford,” she said.