| 28 May 2024, Tuesday |

Global economy may lose up to $2.4tn due to Covid’s impact on tourism, UN says

While developing countries are expected to shoulder the biggest burden of impacts imposed by the pandemic, the UN Conference on Trade and Development said in a report on Wednesday, that global economy could lose between $1.7 trillion and $2.4tn in 2021 as a result of the coronavirus-induced contraction in the tourism industry.

Taking into account the indirect effects, a drop in tourism receipts may lead to a two-and-half-fold loss in global economic output on average, in the absence of any stimulus measures, it said.

In a pessimistic scenario, in which tourist arrivals drop by an average of 74 per cent this year, compared with 2019, global tourism receipts are expected to drop by about $1tn and wipe out $2.4tn in global domestic product.

In an optimistic scenario, with a drop in tourist arrivals averaging 63 per cent, tourism revenue is set to fall by $695 billion, leading to a $1.7tn loss in GDP.

The third scenario assumes a 75 per cent reduction in tourism arrivals in countries with low vaccination rates and a 37 per cent reduction in countries with relatively high vaccination rates. In this case, the global economy would lose about $1.8tn, compared with 2019 levels.

The travel and tourism sector was among the worst hit around the world last year as Covid-19 disrupted trade, sparked lockdowns, shut borders, grounded air travel and plunged the global economy into its deepest recession since the Great Depression.

The world economy contracted by 3.3 per cent last year, according to the International Monetary Fund. It is now set to grow 6 per cent this year.

The recovery, which depends on countries’ access to Covid-19 vaccines, will be highly uneven, with low vaccination rates expected to deter tourists from visiting developing countries, the UN agency said.

“The recovery will depend, to a large extent, on the uptake of vaccines, the removal and co-ordination among countries of travel restrictions and the rebuilding of travellers’ confidence,” Unctad said.

At a regional level, the major beneficiaries of a quick rebound in tourism in absolute terms are the US, France, Germany, the UK and Switzerland.

“These countries have high levels of tourists and high vaccination rates,” Unctad said.

If labour and capital could be readily re-employed in other industries, the overall impact of a fall in tourism demand would be somewhat less than its direct effects, it said.

The loss of tourism receipts would be partially offset by output in other sectors.

This is difficult to do in the short run in developing countries that depend on tourism, but more achievable in the longer run, said Unctad.

With tourism not expected to fully recover until perhaps 2023, the UN agency highlighted three main policy recommendations.

The first is to put tourism back on track in developing countries and elsewhere.

“Much needs to be done to restore the confidence of travellers, who are concerned about health and the risk of cancelled travel plans and becoming stranded overseas,” Unctad said.

“Vaccinations seem the most important element.”

Secondly, countries must mitigate the impact of tourism losses on livelihoods.

Third, countries need to make strategic decisions regarding the sector’s place in their economies in the future.

“Developing countries dependent on tourism might consider how they can diversify resources away from tourism,” it said.

  • The National News