United Nations report says COVID-19 impact on tourism could deal $4 trillion blow to global economy

The collapse of the international tourism market due to the Coronavirus pandemic could cause a loss of more than US$4 trillion to global GDP for the years 2020 and 2021, according to a report from United Nations UN trade and development body UNCTAD.

Released today in conjunction with the UN World Tourism Organization (UNWTO), the reports shows both the pandemic’s direct impact on tourism and its ripple effect on other sectors closely linked to it.

Having estimated last July that the halt in international tourism would cost the global economy between $US1.2 trillion and $US3.3 trillion, the new UNCTAD figures show a worse than previously expected economic hit.

Global vaccination plan crucial 
Noting that the tourism sector’s recovery will largely depend on the uptake of COVID-19 vaccines globally, UNCTAD acting Secretary-General, Isabelle Durant advised “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.”

UNWTO Secretary-General, Zurab Pololikashvili added “tourism is a lifeline for millions, and advancing vaccination to protect communities and support tourism’s safe restart is critical to the recovery of jobs and generation of much-needed resources, especially in developing countries, many of which are highly dependent on international tourism.”

Developing countries hurt by vaccine inequity
With COVID-19 vaccinations being more pronounced in some countries than others, the report says, tourism losses are reduced in most developed countries but worsened in developing countries.

COVID-19 vaccination rates are uneven across countries, ranging from below 1% of the population in some countries to above 60% in others.

According to the report, the asymmetric roll-out of vaccines magnifies the economic blow tourism has suffered in developing countries, as they could account for up to 60% of the global GDP losses.

The tourism sector is expected to recover faster in countries with high vaccination rates, such as France, Germany, Switzerland, the United Kingdom and the United States, the report says.

Nonetheless, the report suggests that a return to pre-COVID-19 international tourist arrival levels is unlikely until 2023 at the earliest, largely due to travel restrictions, slow containment of the virus, low traveller confidence and a poor economic environment.

Different recovery scenarios
The report assesses the economic effects of three possible scenarios - all reflecting reductions in international arrivals - in the tourism sector in 2021.

The first one, projected by UNWTO, reflects a reduction of 75% in international tourist arrivals - the most pessimistic forecast - based on the tourist reductions observed in 2020.

In this scenario, a drop in global tourist receipts of $US948 billion causes a loss in real GDP of $US2.4 trillion, a two-and-a-half-fold increase. This ratio varies greatly across countries, from onefold to threefold or fourfold.

This is a multiplier and depends on the backward linkages in the tourism sector, including the unemployment of unskilled labour, according to the report.

For example, international tourism contributes about 5% of the GDP in Turkey and the country suffered a 69% fall in international tourists in 2020.

The country’s fall in tourism demand is estimated at $US33 billion and this leads to losses in closely linked sectors such as food, beverages, retail trade, communications and transport.

Turkey’s total fall in output is $US93 billion, about three times the initial shock. The decline in tourism alone contributes to a real GDP loss of about 9%. This decline in reality was partly offset by fiscal measures to stimulate the economy.

The second scenario reflects a 63% reduction in international tourist arrivals, a less pessimistic forecast by UNWTO.

And the third scenario, formulated by UNCTAD, considers varying rates of domestic and regional tourism in 2021.

It assumes a 75% reduction of tourism in countries with low vaccination rates, and a 37% reduction in countries with relatively high vaccination rates, mostly developed countries and some smaller economies.

Job losses across countries
According to the report, the reduction in tourism causes a 5.5% rise in unemployment of unskilled labour on average, with a high variance of 0% to 15%, depending on the importance of tourism for the economy.

Labour accounts for around 30% of tourist services’ expenditure in both developed and developing economies. Entry barriers in the sector, which employs many women and young employees, are relatively low.