Tourism Countries, the Most Vulnerable in the Post-COVID-19 WorldBy Daniel González | Mon, 04/20/2020 - 17:00
The 2008 economic crisis caused by sub-prime mortgages and the subsequent fall in real estate market prices hampered the world’s main economies. Nevertheless, many of the countries affected opted for diversification of their products and services regarding exports and goods produced. This, with the intention of avoiding a similar situation in the medium and long-term. The US and China, for example, opted for diversification, with technological development as their main exports. Silicon Valley and Shenzen became technological laboratories capable of generating immense wealth for their citizens, while adding value to the economy. Other countries, such as Italy, Greece or Spain bet on putting all their eggs in one basket: tourism. The development of low-cost tourism has enabled these countries to rapidly lower their unemployment rates, although it has made them highly dependent on this source of wealth. According to the International Monetary Fund (IMF), these countries will take the longest to recover economically from the COVID-19.
According to the World Tourism Organization (WTO), France, Spain, the US, China and Italy are the countries that received the most tourists in 2019. Countries that also had a high number of tourists include Turkey, Mexico, Germany, Thailand and the UK. This data contrasts with the latest projection made by the IMF. The institution, dependent on the United Nations (UN), has recently published a report in which it analyzes which are the most vulnerable economies in the world in times of COVID-19. The results are in. Countries that base their economies on tourism will be the most affected. According to the Washington DC-based institution, Greece and Italy are in 12 and 13 place among the economies that will fall most by the end of 2020, while Spain places 24. Other touristic destinations that will see a decrease in business include Aruba, Belize, Seychelles, Antigua and Barbuda, Croatia, Bahamas, Saint Kitts and Nevis and Maldives.
Mexico will drop a 6.60 percent in its GDP by the end of 2020, according to the same report. Although the country is not among the most affected countries on the list, its tourism sector will suffer greatly. Tourism in Mexico represents 8.7 percent of GDP and along oil and remittances from the US, it is one of the three sectors that contributes most to the country’s revenue. According to data from the Anahuac Center for Tourism Research and Competitiveness (COCITUR), the country’s tourism GDP will fall between 3 percent and 5 percent. This can be attributed to the country's dependence on foreign tourists and the extraordinary losses experienced by airlines. The Mexican government reports that the volume of international passengers fell by 40 percent during the month of March, while the most optimistic estimates place the losses in the tourism sector at US$7.4 billion. So far, no measures have been implemented to contain the decline. Miguel Torruco, Secretary of Tourism, recently said it will take three months to see how the sector behaves worldwide. Only then will he take action. In the meantime, the Association of Mexican Tourism Secretaries (ASETUR) has launched a digital campaign to try to anticipate what will happen in the future. Efforts are being made; nevertheless, to see concrete results the country will have to wait.
For Caribbean countries the situation is far more serious. The region is used to dealing with natural disasters that force the closure of ports and airports almost every year. Unfortunately, these countries face an unprecedented situation. Their dependence on the US (Forbes estimates that 80 to 90 percent of the food consumed in the West Indies comes from abroad) could lead to major cuts in material supplies, as the mandatory confinement and travel bans will have a severe impact on their economies. For example, according to WTO, 58 percent of all Jamaican’s income depends on tourism. The global economic downturn could lead to price volatility and significant capital flight that could affect the rest of the economy in the long-term.
However, crisis can open windows for opportunities. In the Antilles, agriculture plays a minor economic role in the region and could open a new path for inter-island trade and as a result break historical dependence on other markets. There could even be a situation in which a free trade area is created between islands that increases the economic interrelationship between territories, while increasing the competitiveness of their products. For the time being, the main concern of these countries is of a greater dimension. On one hand, it constitutes the ability to receive sufficient supplies so the economic situation does not turn into a humanitarian crisis. On the other hand, the priority is to have the ability to create enough storage space to store production that was supposed to be exported to other markets.
“We are going to work with the Caribbean countries on ambitious proposals to generate a new outreach strategy based on online systems and the use of cellular telephony, as well as to encourage horizontal cooperation by encouraging the ministers' contacts with key countries that will make it possible to build bridges and take advantage of existing complementarities,” said Manuel Otero, Director General of the American Institute for Cooperation on Agriculture (IICA) during a conference attended by representatives from Trinidad and Tobago, Antigua and Barbuda, St. Kitts and Nevis, Bahamas, Barbados, Dominica, Suriname, Grenada, Guyana, Haiti, Jamaica, St. Lucia and St. Vincent and the Grenadines.