Badri Narayanan Gopalakrishnan, Ralf Peters and David Vanzetti
This paper focuses on the potential economic effects of the halt of tourism, in the short and medium-term, in the major tourist destinations as well as in those countries highly dependent on tourism (as a share of GDP). In this context, special attention is placed on developing countries where the prosperity of some communities can be seriously compromised by the fall of tourism revenues. The paper considers three different scenarios to quantify the impact of the reduction in global tourism on country incomes, trade, and employment using a general equilibrium model that captures the backward and forward linkages between sectors. The paper concludes with policy implications.
By the end of the first quarter of 2020, the COVID-19 pandemic had brought international travel to an abrupt halt and significantly impacted the tourism industry.
For many developed and developing countries, the tourism sector is a major source of employment, government revenue and foreign exchange earnings.Without this vital lifeline, many countries may experience a dramatic contraction in GDP and a rise in unemployment.
Using a computable general equilibrium model (GTAP), we assess the implications of the COVID-19 crisis on the tourism sector. Depending on the duration of the global lockdown, the paper estimates the direct and indirect costs of the shutdown for 65 individual countries and regions and 65 sectors, covering the global economy.
In some countries, unemployment could rise by more than 20 percentage points and some sectors could nearly be wiped out if the duration of the tourism standstill is up to one year.