Tourism Trauma and COVID-19

IMF Blog, August 20, 2020

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Pandemic-related lockdowns, flight cancellations, and border closures have led to a precipitous drop in tourism with outsized impacts on countries that rely on foreign travelers.
Costa Rica, Greece, Morocco, Portugal, and Thailand could be among the hardest hit with losses in tourism proceeds exceeding 3 percent of GDP, according to the IMF’s recently released 2020 External Sector Report.
The analysis focuses on direct tourism impacts on imports, exports, and current account balances and emphasizes medium to large economies; smaller tourism-dependent states could face dramatically larger direct impacts.

Assumes gradual reopenings in September.
Assumes a drop of about 70 percent in tourism receipts and international tourism arrivals in 2020.

Thailand:
- A decrease in tourism could bring the country’s overall exports down by 8 percentage points of GDP in 2020.
- The direct net impact on Thailand’s current account balance could be about 6 percentage points of GDP in 2020.
- This could erode part of the 7 percent overall current account surplus the country had in 2019.
Multiple countries (listed above) could see losses in tourism proceeds exceeding 3 percent of GDP under the scenario.

The overall effect on current account balances may be less than the projected direct impacts due to offsetting indirect effects.
Smaller, tourism-dependent countries and larger economies with substantial tourism industries often rely on imports to support tourism activity; a drop in tourism exports and related economic activity will lead to a corresponding drop in imports, which lessens the overall impact on the current account balance.
Much remains unknown about the pace of tourism recovery in 2020; peoples’ desire and ability to travel abroad may continue to face headwinds going into 2021, leaving an uncertain outlook for tourism industries in economies both big and small.

Source: IMFBlog — “Tourism Trauma and COVID-19,” Cyril Rebillard, August 20, 2020.