Global tourism has been hit hard by the COVID-19 pandemic, with closed borders and other restrictions. The most vulnerable tourist destinations are in what can be described as an economic corona hell.
Recovery could take time, experts warn.
”We now expect that in most cases tourism will not have recovered to pre-crisis levels until 2023,” says David Rogovic, senior analyst at rating agency Moody's Investors Service.
”There will be a lift in 2021, but it is from a depressed level,” he adds.
Countries with a strong tourist industry are being hit harder than others by the coronavirus crisis. The GDP of Mediterranean countries has plummeted by 12-18 percent in the second quarter. In northern European countries, the setback is also historically large, but not nearly as dramatic.
The worst affected are so-called tourist paradises, often small island nations with a disproportionately large share of tourism in the gross domestic product (GDP).
A clear example is Fiji, which welcomed 711 visitors in July this year, according to the country's statistics office. This compares with 96,376 visitors in the same month last year. According to its most recently published forecast, Fiji's central bank expects GDP to fall by 21.7 percent this year.
Another horror example is the Chinese Macau – also known as the Las Vegas of Asia – whose GDP in the second quarter of this year was a breathtaking 67.8 percent lower than in the second quarter of last year.
Iceland, whose economy normally makes up a quarter of its revenue from tourism, is also in trouble. The number of hotel nights there halved in July, while air travel plunged by about 80 percent compared to the same month last year.
Ratings agency Fitch just lowered its forecast for Iceland to a GDP decline of 8.6 percent in 2020 after new quarantine rules were introduced for foreign tourists.
”Air travel is not expected to return to pre-COVID-19 levels for several years,” Fitch writes.
David Rogovic wrote an alarming report for Moody's on tourism and the coronavirus in June. Since then, things have gotten worse than he thought, with unexpectedly prolonged problems with the spread of infection and closed borders for the tourist paradise. He believes that global tourism could plummet by 50–75 percent this year compared to last year.
Other analysts, such as the consulting firm McKinsey, estimate the decline in global tourism to be 80 percent this year – and warn that 120 million jobs are at stake.
”"In the Maldives, the number of foreign tourists has fallen by 60 percent so far this year, as they have had closed borders for several months. Other tourist countries, such as Montenegro, have had 80 percent fewer visitors in July–August than last year," says Rogovic.
In addition to these two tourist paradises, Rogovic warns of government financial problems in the wake of the corona crisis in, among others, Saint Vincent and the Grenadines, Georgia and Belize.
”Some are islands that depend almost exclusively on tourism for their growth, their tax revenues and their current account balance. And they already had high debt levels when they entered 2020, with weak public finances and other challenges,” he says.
In addition to the sheer tourist blow, the GDP collapse in each country is determined by the extent of domestic infection control measures, such as closed schools, shops, restaurants, hotels and, in some cases, stopped public transport.
Those worst affected have already had payment problems. Belize, for example, had its credit rating downgraded by Moody's in May after the country requested a moratorium on interest payments on existing bond loans due to the crisis.
Debt problems are also mounting as large parts of GDP are wiped out while spending increases. The forecast for the tourist paradise of the Bahamas is currently that the government debt share of GDP will skyrocket to 85 percent by next summer, compared to 60 percent before the corona crisis, according to Rogovic.
SEB's chief strategist for emerging economies, Per Hammarlund, really sees no other way out for the tourist paradise than to ride out the storm.
”There aren't many alternatives,” says Hammarlund.
However, he reminds us that tourism has historically recovered quickly after disasters, terrorist attacks or sanctions and does not believe that it will take as long for the recovery as other analysts believe.
”"Once we have a vaccine that is widely available and they ease travel restrictions, tourism will come back in leaps and bounds. It may take some time for airlines to get back to capacity, but as long as pricing remains in place and airline tickets are sold, tourism will come back," says Hammarlund.
He adds that it is also an advantage that it is moving like small countries, as any support packages from the IMF and the World Bank do not need to be so large.
According to Rogovic, one strategy that the Maldives and Belize are using is to adapt their tourism offerings to the corona pandemic, with increased opportunities for social distancing and better access to healthcare.
”They are trying to make people feel safer, on the flight, when they land and at the destination rather than changing their economic structures,” he says.
Source: TT
