which country is heavily dependent on tourism for its livelihood

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Which Country Is Heavily Dependent On Tourism For Its Livelihood?

Published: December 12, 2023

Modified: December 28, 2023

by Neely Bonner

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Introduction

Tourism plays a vital role in the global economy, providing employment opportunities, driving economic growth, and contributing to the cultural exchange between nations. While many countries heavily rely on tourism as an industry, there are some nations that are particularly dependent on this sector for their livelihood. These countries, often characterized by their stunning natural landscapes, diverse cultures, and historical attractions, have built their economies around tourism, making it a primary source of income for both individuals and the government.

Heavy dependency on tourism refers to the situation where a country’s economy is significantly reliant on income generated from the tourism industry. This reliance can be due to various factors such as limited alternative economic opportunities, geographical advantages, or the country’s unique attractions that draw in a large number of visitors.

The importance of tourism for these countries cannot be understated. It not only brings in foreign exchange but also creates job opportunities for the local population, helps in infrastructure development, and promotes cultural preservation. However, it also poses certain challenges and risks, such as economic vulnerability, environmental degradation, and over-dependence on external factors.

In this article, we will explore the concept of heavy dependency on tourism, understand the factors contributing to it, and examine the economic impact and challenges associated with this dependence. We will also discuss sustainable tourism strategies that can help these countries address the risks and ensure long-term economic stability. To illustrate these points, we will focus on the profile of a specific country heavily dependent on tourism, highlighting its unique characteristics, successes, and potential pitfalls.

Definition of Heavy Dependency

Heavy dependency on tourism refers to a situation where a country’s economy is heavily reliant on the income generated from the tourism industry. In these countries, tourism plays a critical role in driving economic growth, providing employment opportunities, and contributing to the overall livelihood of the population.

When a country is considered to have a heavy dependency on tourism, it means that a significant portion of its revenue, GDP (Gross Domestic Product), and employment comes directly from the tourism sector. These countries often prioritize tourism as a strategic industry and invest heavily in promoting their destinations to attract visitors from around the world.

The metrics used to measure heavy dependency on tourism include the percentage of GDP contributed by tourism, the number of jobs created in the tourism industry, and the level of foreign exchange earnings from tourism-related activities. Countries with a high percentage of tourism contribution to their GDP, a large workforce engaged in tourism-related jobs, and substantial foreign exchange earnings are often considered to have a heavy dependency on tourism.

It is important to note that heavy dependency on tourism is not necessarily a negative thing. In fact, many countries have successfully leveraged their natural, cultural, and historical assets to build robust tourism industries that provide significant economic benefits. However, it does come with certain risks and challenges, which we will explore further in this article.

Importance of Tourism for Livelihood

Tourism plays a crucial role in providing livelihood opportunities for individuals and communities in countries heavily dependent on this industry. Here are some key reasons why tourism is vital for the livelihood of these nations:

• Employment Opportunities: Tourism creates a wide range of jobs, from hotel staff and tour guides to artisans and transportation providers. In countries heavily dependent on tourism, these employment opportunities are often significant, absorbing a significant portion of the local workforce. The tourism industry provides direct employment as well as indirect employment through related sectors such as hospitality, transportation, and retail. It helps reduce unemployment rates and alleviates poverty by offering income-generating activities to local communities.
• Economic Growth: Tourism is a significant contributor to the economic growth of countries heavily dependent on this industry. The revenue generated from tourism activities, such as accommodation, food and beverage services, and entertainment, directly contributes to the country’s GDP. This economic growth leads to increased government revenue, which can be reinvested in infrastructure development, healthcare, education, and other public services, further improving the livelihood of the population.
• Promotion of Cultural Exchange: Tourism promotes cultural exchange between visitors and the local community. Visitors have the opportunity to learn about the local customs, traditions, and way of life, providing a platform for cultural understanding and appreciation. This cultural exchange can lead to the preservation and promotion of traditional arts, crafts, and heritage, contributing to the livelihood of artisans and cultural practitioners.
• Infrastructure Development: With the growth of tourism, countries heavily dependent on this industry often invest in improving their infrastructure. This includes the construction of airports, roads, hotels, and other tourism-related facilities. As a result, the local population benefits from improved transportation networks, better access to basic services, and enhanced connectivity, which ultimately improves their overall quality of life.
• Promotion of Small-Scale Enterprises: Tourism provides opportunities for small-scale enterprises to thrive. Local entrepreneurs can set up businesses that cater to the needs of tourists, such as souvenir shops, restaurants, and tour operations. This promotes economic diversification, reduces income inequalities, and fosters entrepreneurship within the local community.

Overall, the importance of tourism for livelihood in countries heavily dependent on this industry cannot be overstated. It provides employment opportunities, drives economic growth, promotes cultural exchange, facilitates infrastructure development, and supports the growth of small-scale enterprises. However, it is essential to address the risks and challenges associated with heavy dependency on tourism to ensure long-term sustainability and balanced economic development.

Factors Contributing to Heavy Dependency on Tourism

Several factors contribute to the heavy dependency on tourism in certain countries. These factors vary based on the country’s unique characteristics, resources, and development strategies. Here are some common factors that contribute to the heavy dependency on tourism:

• Natural Attractions: Many countries heavily dependent on tourism possess remarkable natural attractions such as pristine beaches, lush forests, majestic mountains, or unique wildlife. These captivating landscapes draw in a large number of tourists seeking unforgettable experiences and breathtaking scenery. Countries like Costa Rica, Maldives, and New Zealand have strategically developed their tourism industry around their natural wonders.
• Cultural and Historical Significance: Countries rich in cultural and historical heritage often attract tourists interested in exploring these aspects. Ancient temples, archaeological sites, traditional festivals, and vibrant cultural traditions can draw significant tourism demand. Countries such as Italy, Egypt, and India have harnessed their cultural and historical treasures to become major tourist destinations.
• Geographical Advantages: Some countries enjoy geographical advantages that make them natural hubs for tourism. These advantages can include favorable climate conditions, strategic location in relation to major tourist destinations, or proximity to popular attractions. For example, countries in the Caribbean region benefit from their naturally beautiful islands and warm tropical climate, attracting tourists from around the world.
• Government Support and Investment: Government policies and support can significantly contribute to the heavy dependency on tourism. When governments prioritize tourism as a strategic industry and invest in infrastructure development, marketing campaigns, and promoting the country as a tourist destination, it can fuel the growth of the tourism sector. This support creates an enabling environment for the industry to thrive, leading to heavy dependency on tourism for economic prosperity.
• Limited Alternative Economic Opportunities: In some cases, countries heavily rely on tourism due to limited alternative economic opportunities. Factors such as lack of natural resources, limited industrial capacity, or remote locations can make tourism the most viable and sustainable option for economic development. These countries often invest in developing tourism infrastructure and services to capitalize on their unique selling points and attract visitors.

These factors are not exhaustive and can differ from country to country. However, they illustrate the main drivers behind the heavy dependency on tourism. It is crucial for countries to recognize these factors and develop sustainable strategies to maintain a balanced economy, mitigate risks, and ensure long-term prosperity.

Country Profile: [Country Name]

[Country Name] is a nation that exemplifies heavy dependency on tourism. With its unique attractions, cultural heritage, and stunning landscapes, it has established itself as a prominent destination for travelers from around the globe. Let’s delve into the profile of this country to understand its key characteristics and the factors contributing to its heavy reliance on tourism.

Geographical Location: [Country Name] is situated in [geographical location], offering a diverse range of natural landscapes and ecosystems. From beautiful coastlines and tropical rainforests to rugged mountains and deserts, it has an abundance of natural wonders that attract nature enthusiasts and adventure seekers.

Cultural Richness: [Country Name] is home to a vibrant and diverse culture, with a rich tapestry of traditions, festivals, and historical landmarks. Its cultural heritage, including ancient temples, archaeological sites, and UNESCO World Heritage sites, offers visitors an opportunity to immerse themselves in the country’s history and traditions.

Unique Attractions: [Country Name] boasts unique attractions that set it apart from other destinations. It could be its iconic landmarks, like [famous landmark], or its exceptional wildlife, such as [unique wildlife species]. These attractions contribute to the country’s allure and make it an enticing choice for tourists seeking extraordinary experiences.

Tourism Infrastructure: To accommodate the influx of visitors, [Country Name] has invested in a well-established tourism infrastructure. It offers a wide range of accommodation options, from luxury resorts to budget-friendly guesthouses, ensuring that travelers of all budgets can find suitable accommodations. Moreover, efficient transportation systems, such as airports, roads, and public transportation, facilitate easy access to different regions of the country.

Government Initiatives: The government of [Country Name] has recognized the potential of tourism as a significant source of revenue and employment. Through proactive policies, they have actively promoted the country as a tourist destination and implemented measures that support the growth of the tourism industry. This includes marketing campaigns, sustainability efforts, and partnerships with industry stakeholders to enhance visitor experiences.

Community Involvement: The local communities in [Country Name] play a crucial role in the tourism sector. They contribute to the preservation of cultural heritage, act as custodians of natural areas, and provide unique experiences through community-based tourism initiatives. These endeavors not only benefit the local economy but also foster a deeper connection between visitors and the local culture.

It is important to note that while [Country Name] has reaped numerous benefits from its heavy reliance on tourism, there are also challenges and risks associated with this dependence. It is essential for the country to strike a balance between economic development and sustainability to ensure the long-term well-being of both the tourism industry and the local communities.

Economic Impact of Heavy Dependency on Tourism

The heavy dependency on tourism has a profound economic impact on countries that rely heavily on this industry. While tourism can bring significant benefits to the economy, it also poses certain challenges and risks. Here, we explore the economic impact of heavy dependency on tourism:

• Revenue Generation: One of the primary benefits of heavy dependency on tourism is the generation of revenue. Income from tourists, including expenditures on accommodations, meals, transportation, attractions, and souvenirs, contributes directly to the country’s GDP. This revenue can help fund infrastructure development, public services, and other critical sectors of the economy.
• Employment Opportunities: Heavy reliance on tourism creates a substantial number of jobs, covering a wide range of sectors. This includes positions in hospitality, travel agencies, transportation, tour guides, handicrafts, and more. The employment opportunities generated by tourism help reduce unemployment rates, provide income for local communities, and improve standards of living.
• Foreign Exchange Earnings: Tourism is often a significant source of foreign exchange earnings for countries heavily dependent on this industry. The influx of international visitors brings in foreign currency, strengthening the country’s foreign reserves. This currency can be used for imports, debt repayments, or investment in other sectors of the economy.
• Infrastructure Development: The growth of tourism requires significant investment in infrastructure development, which benefits not only the tourism industry but also the overall economy. To cater to the needs of travelers, countries heavily reliant on tourism invest in transportation networks, airports, hotels, restaurants, and other tourism-related facilities. This infrastructure development also enhances the country’s attractiveness as a destination for other industries and investors.
• Multiplier Effect: The economic impact of tourism extends beyond direct revenue generation. It has a multiplier effect, meaning that money spent in the tourism sector circulates throughout the economy, benefiting various industries. For example, income earned by hotel employees can be spent on local businesses, such as shops, restaurants, and services. This multiplier effect stimulates economic activity and supports a diverse range of sectors.

However, heavy dependency on tourism also presents certain risks and challenges that need to be addressed. Economic vulnerability, fluctuations in visitor numbers, and over-reliance on external factors can leave countries susceptible to economic shocks. It is essential for these nations to diversify their economies, promote sustainable tourism practices, and invest in other industries to reduce their vulnerability and ensure long-term economic stability.

Understanding the economic impact of heavy dependency on tourism is crucial for countries to develop strategies that maximize the benefits while mitigating the risks. By nurturing a sustainable tourism industry and diversifying their economies, countries can strive for a balanced and resilient economic future.

Challenges and Risks of Heavy Dependency on Tourism

While heavy dependency on tourism can bring economic benefits, it also poses various challenges and risks for countries heavily reliant on this industry. It is essential to recognize and address these challenges to ensure long-term sustainability. Here are some key challenges and risks associated with heavy dependency on tourism:

• Economic Vulnerability: Depending heavily on tourism makes a country economically vulnerable. Fluctuations in visitor numbers, global economic downturns, natural disasters, or political unrest can severely impact the tourism industry and result in significant revenue loss. Without diversification, the economy becomes highly susceptible to these external shocks, potentially leading to economic instability and unemployment.
• Seasonality and Overcrowding: Many tourist destinations experience seasonality, with peak periods attracting a large influx of visitors and off-peak periods facing a decline in tourist numbers. This seasonality can lead to challenges in managing resources efficiently, such as balancing hotel occupancy rates, maintaining consistent employment levels, and providing quality services during peak times. Overcrowding due to high tourist numbers can also strain infrastructure and negatively impact the local environment, culture, and quality of life for residents.
• Dependency on External Factors: Heavy reliance on tourism means being dependent on external factors beyond the control of the country. Changes in travel trends, economic policies of tourist-generating countries, currency exchange rates, and global events can significantly affect the number of visitors, their spending patterns, and the overall tourism industry. This dependency exposes the country to risks that it may have limited control over, making long-term planning and stability challenging.
• Environmental Degradation: Tourism, if not managed sustainably, can lead to environmental degradation. Increased infrastructure development, overuse of natural resources, pollution, and habitat destruction can harm ecosystems and biodiversity. This not only affects the natural attractions that draw tourists but also disrupts the delicate balance of the local environment, potentially leading to negative consequences for the long-term sustainability of the tourism industry itself.
• Social and Cultural Impact: Heavy tourism can have social and cultural impacts on local communities. The influx of tourists may lead to increased pressure on local resources and amenities, potentially causing conflicts with residents. In some cases, the authenticity of local culture and traditions may be commodified or compromised for commercial interests. Maintaining the integrity of local communities, preserving cultural heritage, and ensuring equitable distribution of tourism benefits are crucial challenges for countries dependent on tourism.

Recognizing these challenges and risks is vital for countries heavily dependent on tourism to develop strategies that mitigate the negative impacts. Diversification of the economy, promotion of sustainable tourism practices, investing in other industries, and actively engaging local communities in decision-making can help countries strike a balance between reaping the benefits of tourism and preserving their natural, social, and cultural integrity.

Sustainable Tourism Strategies

For countries heavily dependent on tourism, adopting sustainable tourism strategies is crucial to ensure the long-term viability of the industry and minimize negative impacts on the environment, communities, and cultural heritage. Here are some key sustainable tourism strategies that these countries can implement:

• Environmental Conservation: Implementing environmental conservation measures is essential to preserve natural resources, biodiversity, and the integrity of ecosystems. This includes promoting responsible tourism practices such as waste management, energy efficiency, water conservation, and protection of sensitive areas. Encouraging eco-friendly transportation options and promoting sustainable activities that respect the environment, such as wildlife viewing and nature trails, can also contribute to environmental preservation.
• Community Engagement: Involving local communities in the development and management of tourism is vital for sustainable outcomes. Empowering local residents through job opportunities, entrepreneurship, and capacity building enhances their sense of ownership and pride in tourism activities. Engaging communities in decision-making processes, preserving cultural heritage, and promoting community-based tourism can help ensure that local people benefit from tourism and actively participate in its sustainable development.
• Diversification of Tourism Products: Relying on a single type of tourism product can increase vulnerability to external factors. Countries should diversify their tourism offerings to cater to a broader range of tourists and attract visitors during off-peak seasons. This can include promoting cultural tourism, adventure tourism, ecotourism, and sustainable agriculture tourism. By diversifying the tourism product, countries can distribute the benefits of tourism more evenly and reduce seasonality-related challenges.
• Strengthening Destination Management: Effective destination management is critical for sustainable tourism. This involves establishing clear regulations, codes of conduct, and guidelines for tourism activities, ensuring that they align with sustainability principles. Collaborating with stakeholders, including local communities, tour operators, accommodation providers, and government agencies, can help create a coordinated approach towards sustainable tourism development. Monitoring visitor flows, managing carrying capacities, and minimizing negative social and environmental impacts are integral to effective destination management.
• Education and Awareness: Promoting education and awareness among tourists, local communities, and industry stakeholders is vital for sustainable tourism. Encouraging responsible traveler behavior, such as respecting local customs, cultures, and natural environments, can minimize negative impacts. Providing training and education programs for tourism professionals on sustainable practices can also enhance the quality of tourism experiences and ensure that sustainable principles are embedded throughout the industry.

By implementing these sustainable tourism strategies, countries heavily dependent on tourism can strive towards a balanced approach that optimizes social, economic, and environmental benefits. Embracing sustainability not only safeguards the natural and cultural treasures but also ensures the long-term livelihoods of local communities and the resilience of the tourism industry as a whole.

Heavy dependency on tourism can provide significant economic benefits to countries, including revenue generation, employment opportunities, and infrastructure development. However, it also presents various challenges and risks that must be addressed to ensure long-term sustainability. Countries heavily dependent on tourism need to implement sustainable tourism strategies that strike a balance between economic growth and environmental and cultural preservation.

Understanding the factors contributing to heavy dependency on tourism, such as unique attractions, geographical advantages, and government support, is crucial for these countries. While natural wonders and cultural heritage attract tourists, governments play a pivotal role in promoting tourism, developing infrastructures, and supporting the industry’s growth.

Evaluating the economic impacts of heavy dependency on tourism reveals the importance of revenue generation, job creation, and foreign exchange earnings. However, vulnerabilities such as economic downturns, seasonality, and external factors necessitate diversification of the economy and investment in other industries to reduce risks and ensure stability.

The challenges and risks associated with heavy dependency on tourism, including economic vulnerability, seasonality, environmental degradation, and cultural impacts, call for sustainable tourism strategies. Conserving the environment, engaging local communities, diversifying tourism products, strengthening destination management, and promoting education and awareness are key components of sustainable tourism development.

In conclusion, countries heavily dependent on tourism must prioritize sustainable practices and long-term planning to ensure the balance between economic growth and the preservation of their natural and cultural assets. By adopting a holistic approach, these countries can continue reaping the benefits of tourism while safeguarding their unique heritage for future generations and fostering the well-being of both visitors and local communities.

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The tourism sector provides opportunities for developing countries to create productive and inclusive jobs, grow innovative firms, finance the conservation of natural and cultural assets, and increase economic empowerment, especially for women, who comprise the majority of the tourism sector’s workforce. Before the COVID-19 pandemic, tourism was the world’s largest service sector—providing one in ten jobs worldwide,  almost seven percent of all international trade and  25 percent of the world’s service exports —a critical foreign exchange generator.  In 2019 the sector was valued at more than US$9 trillion and accounted for 10.4 percent of global GDP.

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The impact of the COVID-19 pandemic has been devastating for tourism service providers, with a loss of 20 percent of all tourism jobs (62 million), and US$1.3 trillion in export revenue, leading to a reduction of 50 percent of its  contribution to GDP  in 2020 alone. The collapse of demand has severely impacted the livelihoods of tourism-dependent communities, small businesses and women-run enterprises. It has also reduced government tax revenues and constrained the availability of resources for destination management and site conservation.

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Which Country Is Heavily Dependent On Tourism For Its Livelihood

• October 24, 2023

Which Country Is Heavily Dependent on Tourism for Its Livelihood

Introduction.

Tourism plays a pivotal role in the global economy, supporting countless livelihoods. Some countries, however, rely on it more than others, shaping their entire economic landscape. In this article, we delve into the nations that are heavily dependent on tourism for their livelihood.

The Island Paradise: Maldives

The Maldives, a picturesque island nation in the Indian Ocean, is a prime example of a country heavily dependent on tourism. Over 60% of its GDP is generated from this sector. The coral reefs, clear waters, and luxury resorts attract millions of tourists every year.

Challenges Faced

Vulnerability to climate change.

Unfortunately, the Maldives is highly susceptible to climate change, with rising sea levels threatening its very existence. This vulnerability is a stark reminder of the challenges associated with a tourism -dependent economy.

Dependency on Foreign Investment

The Maldives also heavily relies on foreign investment to maintain its tourism infrastructure. This puts the nation at risk during global economic downturns.

The Land of the Pyramids: Egypt

Egypt, renowned for its historical treasures, heavily depends on tourism. It contributes around 15% of Egypt’s GDP. Visitors flock to marvel at the pyramids, temples, and cruise along the Nile.

Political Instability

Egypt has faced periods of political instability, deterring tourists from visiting. These disruptions significantly impact its economy.

Security Concerns

Security concerns, including incidents like terrorist attacks, have had a negative impact on tourism. Egypt has been working on enhancing safety to attract more tourists.

The Caribbean Gem: Jamaica

Jamaica, with its vibrant culture and stunning beaches, relies heavily on tourism, contributing significantly to its GDP. The warm climate, reggae music, and friendly locals make it a popular destination.

Seasonal Fluctuations

Jamaica experiences seasonal fluctuations in tourism. Hurricanes and rainy seasons affect the flow of tourists, impacting the livelihoods of the locals.

Competition in the Region

Competition from neighboring Caribbean nations can be a challenge for Jamaica. Continuous innovation is necessary to remain competitive.

Tourism is a double-edged sword for countries heavily reliant on it for their livelihoods. While it can bring prosperity, it also exposes these nations to vulnerabilities like economic downturns, climate change, and political instability. Understanding these challenges is crucial for the sustainable development of these economies.

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These are the countries most reliant on your tourism dollars

Almost 1.5 million people went to the Maldives in 2018. For these vacationers, their visits were restful opportunities to lie on beaches and suck down fruity drinks. For the island nation’s 430,000 people, they had a far more critical function: contributing more than a third of the country’s GDP.

The Maldives, located in the Indian Ocean, is the country most reliant on tourism. Around 20 others across the world derive more than 10% of their gross domestic product from tourism. Most are small, with a population well below a million people. The vast majority are in the developing world, where luxury resorts stand in stark relief to the reality of most locals.

Troublingly, more than half are islands and archipelagos. With few natural resources beyond pristine beaches and breathtaking views, tourism is an obvious economic focus. Unfortunately, these countries are extremely vulnerable to climate change, and have a huge amount to lose, including their tourist industry. They’re at high risk from rising sea levels obliterating resorts and coastal properties, the death of coral reef, and soil salinization threatening crops, as well as extreme weather events.

Source: The World Bank

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Tourism’s Importance for Growth Highlighted in World Economic Outlook Report

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• 10 Nov 2023

Tourism has again been identified as a key driver of economic recovery and growth in a new report by the International Monetary Fund (IMF). With UNWTO data pointing to a return to 95% of pre-pandemic tourist numbers by the end of the year in the best case scenario, the IMF report outlines the positive impact the sector’s rapid recovery will have on certain economies worldwide.

According to the World Economic Outlook (WEO) Report , the global economy will grow an estimated 3.0% in 2023 and 2.9% in 2024. While this is higher than previous forecasts, it is nevertheless below the 3.5% rate of growth recorded in 2022, pointing to the continued impacts of the pandemic and Russia's invasion of Ukraine, and from the cost-of-living crisis.

Tourism key sector for growth

The WEO report analyses economic growth in every global region, connecting performance with key sectors, including tourism. Notably, those economies with "large travel and tourism sectors" show strong economic resilience and robust levels of economic activity. More specifically, countries where tourism represents a high percentage of GDP   have recorded faster recovery from the impacts of the pandemic in comparison to economies where tourism is not a significant sector.

As the report Foreword notes: "Strong demand for services has supported service-oriented economies—including important tourism destinations such as France and Spain".

Looking Ahead

The latest outlook from the IMF comes on the back of UNWTO's most recent analysis of the prospects for tourism, at the global and regional levels. Pending the release of the November 2023 World Tourism Barometer , international tourism is on track to reach 80% to 95% of pre-pandemic levels in 2023. Prospects for September-December 2023 point to continued recovery, driven by the still pent-up demand and increased air connectivity particularly in Asia and the Pacific where recovery is still subdued.

Related links

• Download the News Release on PDF
• UNWTO World Tourism Barometer
• IMF World Economic Outlook

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The COVID-19 travel shock hit tourism-dependent economies hard

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Gian maria milesi-ferretti gian maria milesi-ferretti senior fellow - economic studies , the hutchins center on fiscal and monetary policy.

August 12, 2021

The COVID crisis has led to a collapse in international travel. According to the World Tourism Organization , international tourist arrivals declined globally by 73 percent in 2020, with 1 billion fewer travelers compared to 2019, putting in jeopardy between 100 and 120 million direct tourism jobs. This has led to massive losses in international revenues for tourism-dependent economies: specifically, a collapse in exports of travel services (money spent by nonresident visitors in a country) and a decline in exports of transport services (such as airline revenues from tickets sold to nonresidents).

This “travel shock” is continuing in 2021, as restrictions to international travel persist—tourist arrivals for January-May 2021 are down a further 65 percent from the same period in 2020, and there is substantial uncertainty on the nature and timing of a tourism recovery.

We study the economic impact of the international travel shock during 2020, particularly the severity of the hit to countries very dependent on tourism. Our main result is that on a cross-country basis, the share of tourism activities in GDP is the single most important predictor of the growth shortfall in 2020 triggered by the COVID-19 crisis (relative to pre-pandemic IMF forecasts), even when compared to measures of the severity of the pandemic. For instance, Grenada and Macao had very few recorded COVID cases in relation to their population size and no COVID-related deaths in 2020—yet their GDP contracted by 13 percent and 56 percent, respectively.

International tourism destinations and tourism sources

Countries that rely heavily on tourism, and in particular international travelers, tend to be small, have GDP per capita in the middle-income and high-income range, and are preponderately net debtors. Many are small island economies—Jamaica and St. Lucia in the Caribbean, Cyprus and Malta in the Mediterranean, the Maldives and Seychelles in the Indian Ocean, or Fiji and Samoa in the Pacific. Prior to the COVID pandemic, median annual net revenues from international tourism (spending by foreign tourists in the country minus tourism spending by domestic residents overseas) in these island economies were about one quarter of GDP, with peaks around 50 percent of GDP, such as Aruba and the Maldives.

But there are larger economies heavily reliant on international tourism. For instance, in Croatia average net international tourism revenues from 2015-2019 exceeded 15 percent of GDP, 8 percent in the Dominican Republic and Thailand, 7 percent in Greece, and 5 percent in Portugal. The most extreme example is Macao, where net revenues from international travel and tourism were around 68 percent of GDP during 2015-19. Even in dollar terms, Macao’s net revenues from tourism were the fourth highest in the world, after the U.S., Spain, and Thailand.

In contrast, for countries that are net importers of travel and tourism services—that is, countries whose residents travel widely abroad relative to foreign travelers visiting the country—the importance of such spending is generally much smaller as a share of GDP. In absolute terms, the largest importer of travel services is China (over $200 billion, or 1.7 percent of GDP on average during 2015-19), followed by Germany and Russia. The GDP impact for these economies of a sharp reduction in tourism outlays overseas is hence relatively contained, but it can have very large implications on the smaller economies their tourists travel to—a prime example being Macao for Chinese travelers.

How did tourism-dependent economies cope with the disappearance of a large share of their international revenues in 2020? They were forced to borrow more from abroad (technically, their current account deficit widened, or their surplus shrank), but also reduced net international spending in other categories. Imports of goods declined (reflecting both a contraction in domestic demand and a decline in tourism inputs such as imported food and energy) and payments to foreign creditors were lower, reflecting the decline in returns for foreign-owned hotel infrastructure.

The growth shock

We then examine whether countries more dependent on tourism suffered a bigger shock to economic activity in 2020 than other countries, measuring this shock as the difference between growth outcomes in 2020 and IMF growth forecasts as of January 2020, just prior to the pandemic. Our measure of the overall importance of tourism is the share of GDP accounted for by tourism-related activity over the 5 years preceding the pandemic, assembled by the World Travel and Tourism Council and disseminated by the World Bank . This measure takes into account the importance of domestic tourism as well as  international tourism.

Among the 40 countries with the largest share of tourism in GDP, the median size of growth shortfall compared to pre-COVID projections was around 11 percent, as against 6 percent for countries less dependent on tourism. For instance, in the tourism-dependent group, Greece, which was expected to grow by 2.3 percent in 2020, shrunk by over 8 percent, while in the other group,  Germany, which was expected to grow by around 1 percent, shrunk by 4.8 percent. The scatter plot of Figure 2 provides more striking visual evidence of a negative correlation (-0.72) between tourism dependence and the growth shock in 2020.

Of course, many other factors may have affected differences in performance across economies—for instance, the intensity of the pandemic as well as the stringency of the associated lockdowns. We therefore build a simple statistical model that relates the “growth shock” in 2020 to these factors alongside our tourism variable, and also takes into account other potentially relevant country characteristics, such as the level of development, the composition of output, and country size. The message: the dependence on tourism is a key explanatory variable of the growth shock in 2020. For instance, the analysis suggests that going from the share of tourism in GDP of Canada (around 6 percent) to the one of Mexico (around 16 percent) would reduce growth in 2020 by around 2.5 percentage points. If we instead go from the tourism share of Canada to the one of Jamaica (where the share of tourism in GDP approaches one third), growth would be lower by over 6 percentage points.

Measures of the severity of the pandemic, the intensity of lockdowns, the level of development, and the sectoral composition of GDP (value added accounted for by manufacturing and agriculture) also matter, but quantitatively less so than tourism. And results are not driven by very small economies; tourism is still a key explanatory variable of the 2020 growth shock even if we restrict our sample to large economies. Among tourism-dependent economies, we also find evidence that those relying more heavily on international tourism experienced a more severe hit to economic activity when compared to those relying more on domestic tourism.

Given data availability at the time of writing, the evidence we provided is limited to 2020. The outlook for international tourism in 2021, if anything, is worse, though with increasing vaccine coverage the tide could turn next year. The crisis poses particularly daunting challenges to smaller tourist destinations, given limited possibilities for diversification. In many cases, particularly among emerging and developing economies, these challenges are compounded by high starting levels of domestic and external indebtedness, which can limit the space for an aggressive fiscal response. Helping these countries cope with the challenges posed by the pandemic and restoring viable public and external finances will require support from the international community.

Read the full paper here.

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Global Health

Countries balance needed tourism with coronavirus concerns.

Joanna Kakissis

Eyder Peralta

Michael Sullivan

Nations that are heavily dependent on tourism are trying to walk a fine line between the need to reopen their beaches and resorts and the risk of importing more cases of the coronavirus.

DAVID GREENE, HOST:

There is a debate about how fast things can or should return to normal here in the United States, but little discussion of when the country should reopen to international visitors. This is a crucial question, though, for leaders of countries that are far more dependent on the tourist industry. They have to balance desperately needed income and employment against the potential risk to their citizens of infection from the outside.

We're getting different views of this dilemma from some of our regular reporters on three different continents. Joanna Kakissis is in Athens. NPR's Eyder Peralta is in Nairobi. Michael Sullivan is in Thailand. They're all with us. Hi, everybody.

JOANNA KAKISSIS, BYLINE: Hello.

EYDER PERALTA, BYLINE: Hey, David.

MICHAEL SULLIVAN, BYLINE: Hi.

GREENE: Well, Joanna, let me start with you. I mean, you're in Greece. This is a country that has gotten some pretty good marks for how they've handled this pandemic. The death toll has been, you know, thankfully, very low. But tourism is, like, 20% of GDP in Greece. So what are the Greeks going to do here?

KAKISSIS: Well, you know, Greece absolutely needs tourism revenue right now. Something like 700,000 jobs are indirectly or directly dependent on tourism. And Greece just recovered from this long economic depression. Now the fallout from the pandemic is expected to shrink the economy by up to 13% this year. So Greece wants to bring in as many tourists as possible to counter that. On June 15, it led in tourists from the European Union. Unfortunately, not many of them have shown up.

So on July 1, Greece hopes to open itself up to tourists from the rest of the world. But it's not clear which countries will be approved by the European Union. Greece is working with other EU member states on the list of which tourists can enter. Making the cut depends entirely on how well these countries are managing the pandemic. And at the moment, the list includes Australia, China, Uganda, but not the United States. The U.S. is considered too risky right now because the infection rate is so high.

GREENE: Well, Eyder, some African countries I know are almost as dependent on the tourism industry as Greece is. But it sounds like they're doing things differently.

PERALTA: Yeah, because everything is still at a standstill here in Africa. The borders of around 40 countries are still totally shut down. So very few tourists are flying in for safaris. I mean, even us - right? - like, we would love to be at the beach right now. But that is impossible because we're not allowed to leave Nairobi. And we are getting to what is usually peak tourism season here. It's the great wildebeest migration is around the corner. But, right now, it doesn't look like very many people will be here to see it.

GREENE: Michael is any of this sounding familiar to you as you've been watching things play out in Thailand?

SULLIVAN: Oh, yeah. I mean, Thailand, like Greece, depends on tourism for as much as 20% of its GDP. That's gone with international travel closed since March. And the lockdown hit Thailand's manufacturing sector, too. So altogether, it's put millions out of work - at least temporarily. Manufacturing is starting up again now that the lockdown has been lifted. But tourism isn't coming back for a while. And, of course, it won't look the same when it does.

The first people that are going to be allowed back here will be foreign businesspeople and foreigners with family here and people coming for medical tourism. They're going to be allowed next week after July 1. But most will still have to be quarantined for 14 days. As for tourists, Asian countries with low infection rates, they're going to be the first allowed back as the region pursues these travel bubbles you've been hearing about, safe country-to-country travel. But even that probably won't happen for another month or so, not until August or September.

GREENE: Well, let's talk about, I mean, more about the pressure that these countries are under to keep citizens safe. Eyder, African countries, I mean, you know, need the money. They need the employment from tourism. But is that just outweighed by the fear of more infection coming from overseas?

PERALTA: I mean, that's what the governments are discussing right now, right? I mean, at the moment, most African countries have actually been very successful at keeping infection rates down. But the thing is that the health care systems here are so weak in many countries that even a tiny spike in infections could overwhelm them. I mean, here in Kenya, for example, hospitals are already reaching capacity. And we just crossed the 5,000-case mark - not very many, relatively.

So opening up the borders would absolutely help economically. But, you know, it could also tip the country into a huge health crisis. And the president here says that opening up would just be irresponsible.

GREENE: Joanna, I mean, you said that the Greek government is hoping to bring as many tourists in as they can to help the economy. What are the fears, though, of more coronavirus?

KAKISSIS: You know, Prime Minister Kyriakos Mitsotakis says, you know, he wants to - he wants people to consider Greece the safest destination in the world. So he's trying to point out that he's taking the steps to keep tourists safe. But, you know, he's taking those same - the government is taking those same precautions to also keep the Greeks safe, too, because, like other countries that don't have a whole lot of money, the health care system here can't stand - can't withstand a huge outbreak.

As far as the tourists go, what - the way the prime minister is trying to lure people here is saying, look; you know, the people in the hospitality industry have to wear masks. The government, you know, we're going to have health workers on standby in case of outbreaks. And he tried to emphasize that these measures won't ruin anybody's vacation. He was on the island of Santorini earlier this month. And he pointed to this gorgeous sunset on the sea and said this.

(SOUNDBITE OF ARCHIVED RECORDING)

PRIME MINISTER KYRIAKOS MITSOTAKIS: You can sit on a veranda with this wonderful view, you know, have your nice Assyrtiko wine, enjoy the beach. But we don't want you crowded in a beach bar.

KAKISSIS: And that's because social distancing will be enforced.

GREENE: I mean, that is such a thing that we're going to be hearing so much of. Go on vacation. Do your thing. But, like, don't crowd into a bar. And it's going to be so dependent of whether people actually listen to that.

KAKISSIS: That's right.

GREENE: Michael, what - any timeframe at all in Thailand for when the country could open up to visitors from Europe, from here in the United States?

SULLIVAN: Don't hold your breath, David. A senior tourism authority official that I spoke to last week said maybe October or November at the earliest, probably not until next year. As I mentioned earlier, it'll be Asian tourists welcomed back first until the Thais are satisfied that the U.S. and European countries have the problem sorted. And who knows when that will be. Their attitude now is, better safe than sorry.

They've had no domestic infections for more than a month now, only 30 - well, fewer than 3,200 total with only 58 deaths. And they want to keep it that way. And Vietnam, which has done even better than Thailand in containing the spread of the virus, it's wary of foreigners, too. And it's allowing some businesspeople to come back this week. But the prime minister said yesterday that Vietnam is in no hurry to allow foreign tourists back.

GREENE: Eyder, can I just come back to you? You mentioned safaris. I mean, so much of a part of the experience visiting different parts of Africa. I mean, not having that, that's going to keep people unemployed. But doesn't that also damage conservation efforts that depend on those dollars?

PERALTA: Yeah. I was talking to Kaddu Sebunya, who's the CEO of the African Wildlife Foundation. And he says this pandemic has shown that conservation depends too much on tourism. He says we're starting to see encroachment into protection areas because people have lost their jobs. And now they're looking to the land to make a living. So he thinks, he worries, that this - that conservation efforts could be erased by this economic crisis.

GREENE: Eyder Peralta in Nairobi. Joanna Kakissis in Athens. Michael Sullivan in Thailand. Thank you all so, so much for this.

PERALTA: Thanks, David.

KAKISSIS: You're welcome, David.

SULLIVAN: You're welcome, David.

(SOUNDBITE OF GABRIEL GARZON-MONTANO'S "THE GAME")

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Pandemic will weigh heaviest on tourism-dependent economies, warns IMF

But impact over rest of decade will not be as bad as that following financial crisis of 2008

• Coronavirus – latest updates
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Scars from the pandemic will prevent the global economy from making a full recovery, though the impact over the rest of the decade will not be as severe as that of the 2008 financial crisis , the International Monetary Fund has said.

Tourism-dependent countries in the Pacific Islands and in the Caribbean – such as Barbados – would be among those to suffer the most, the Washington-based organisation said. It expected global output to be about 3% lower in 2024 than projected before the Covid-19 pandemic.

A speedy rollout of Covid-19 vaccines in the US, China and the UK among others is expected to raise the forecast for growth when the IMF provides a fresh outlook for this year and next, despite a third wave of the virus spreading across Europe and parts of south America that will dampen the rebound.

In its most recent economic update in January , the IMF said the global economy was on course to recover from a 3.5% fall in GDP in 2020 with growth of 5.5% in 2021, up slightly compared with October’s forecast.

However, in a summary of its twice-yearly world economic outlook, to be published next week, the IMF said a freeze on business investment in the early months of the pandemic and the hit to consumer spending that still affects most countries for business failures and job losses would have longer term repercussions for the recovery.

In a separate report, the World Trade Organization revised up its forecast for growth this year of global goods trade after a decline in 2020 that was far less severe than its expectation when the coronavirus first struck.

The WTO said it expected merchandise trade would grow this year by 8.0% after a fall of 5.3% in 2020. That compared with figures in October of respectively 7.2% growth and a 9.2% decline.

The Geneva-based trade body said that trade growth should slow to 4.0% in 2022, below its pre-pandemic trend.

IMF managing director Kristalina Georgieva warned that the effects of the disruption would be uneven and most damaging in emerging markets, which could become caught in debt crisis.

She warned that a flight of funds out of local currencies into dollar assets “would pose major challenges, especially to middle-income countries with large external financing needs and elevated debt levels.”

The IMF said in a blogpost to accompany its forecast that the path to recovery would also remain challenging for poorer countries that relied heavily on some of the hardest hit industries such as tourism.

“Unlike what happened during the global financial crisis, emerging market and developing economies are expected to have deeper scars than advanced economies, with losses expected to be the largest among low-income countries,” it said.

This was true for the Caribbean or the Pacific Islands, with gross domestic product in the latter estimated to be 10% lower in 2024 than pre-pandemic projections, the IMF said.

The pandemic could also have a bigger impact on the labour market over the medium- and longer term as workers are forced to leave sectors that shrink because contact industries fall out of favour or digital processes become more prevalent, the IMF said.

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• Pacific islands
• World Trade Organization
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