Globalisation and tourism are longstanding bedfellows. It comes as little surprise, then, that the shockwaves sent through the global economy as a result of the pandemic have been particularly devastating for the tourism sector and tourism-dependent countries.
Due to national lockdowns and travel bans, international tourist arrivals fell by 73% in 2020, according to the World Tourism Organisation (UNWTO). While many countries in tourism-heavy regions, such as the Pacific or the Caribbean, did not experience a significant spread of Covid-19 among their own populations, the quarantines implemented in the US and Europe delivered an unprecedented blow to their economies.
While the global economic contraction for 2020 stood at -4.4% in real gross domestic product (GDP) growth, according to IMF figures, the effect on the most tourism-dependent countries was even worse.
Macau, a special administrative region in the People’s Republic of China that has the highest proportion of GDP generated by travel and tourism in the world, suffered a real GDP setback of -56.3%. Meanwhile, the tourism-dependent Caribbean countries — Antigua and Barbuda, Aruba, the Bahamas, Barbados, Belize, Dominica, Grenada, Haiti, Jamaica, St Kitts and Nevis, St Lucia, and St Vincent and the Grenadines — were hit by a -10.1% knock to their real GDP.
According to the latest IMF projections, the region’s tourism-dependent countries are expected to grow at a real GDP rate of 1.4% and 5.1% in 2021 and 2022, respectively.
A range of solutions
Following the early setbacks, some governments, such as Vanuatu, have provided financial support to help their citizens and small businesses. Others have been too fiscally challenged to do so. The Caribbean is one of the most indebted regions in the world and something of a poster child for high debt, limited fiscal space, high public sector employment and heavy tourism dependence.
Initially, there were moves to capitalise on the region’s natural resources of sun, sand and sea by attracting well-heeled global citizens who wanted to add a beach to their work-from-home set-up. In June 2020, Barbados introduced a `welcome stamp’ visa — a one-year residency permit that allows foreign employees to live in and work from the country remotely.
Elsewhere, in the same month, Fiji launched a `blue lanes’ initiative that allowed yachts to berth in its marinas after meeting strict quarantine and testing requirements, a move the government called “a first step towards economic recovery”. The country is currently waiting to see if a Pacific corridor can be established between Australia and New Zealand and the Pacific islands.
In Europe, Mediterranean countries for whom tourism is a major sector, such as Greece, Turkey and Portugal, are on tenterhooks as to whether the EU’s "Digital Covid Certificate” will provide their economies with a much-needed boost. Tourism accounts for 20.3% of Greece’s economy as of 2019 and according to Reuters, the Greek central bank estimates a quarter of loans to the sector are now non-performing.
Push for diversification
Confronted with their own vulnerability, many countries have pushed ahead with diversification schemes. Barbados, for example, plans to set up a special economic zone (SEZ).
The Maldives, which relies on tourism for foreign exchange receipts for imports and where tourist arrivals fell 67.4% in 2020, is also stepping up its diversification proposition. “We’re currently working on economic diversification through expanding the fisheries and agricultural sectors, establishing a decentralised network to provide public services,” president Ibrahim Mohamed Solih told CNBC in a recent interview.
When tourism eventually takes off again, it is unlikely to be business as usual. Expectations are for greater horizontal integration with other sectors, such as agriculture, aquaculture and wellness. For instance, the Vanuatu Department of Tourism has partnered with Planet Happiness to measure its residents’ happiness and wellbeing in a bid to “promote a tourism industry that is ethical, inclusive, cares for all our people, regenerates and protects our environment, customs and culture”.
The IMF reports that post-pandemic there will be “a continuing shift toward ecotourism — a fast-growing industry focused on conservation and local job creation”. It predicts this could give an additional boost to the industry, citing Thailand’s attempts to shift to niche markets such as adventure travel and health and wellness tours.
Time will tell in what form tourism returns and how comfortable people feel travelling — but ahead of the unpredictability of the climate crisis, the need for structural reform and foreign investment in island economies with few natural resources and heavy debt burdens has never been clearer.
This article first appeared in the June/July print edition of fDi Intelligence. View a digital edition of the magazine here.