The world’s tourism sector could lose at least $1.2 trillion, or 1.5 per cent of the global gross domestic product (GDP), having been placed at a standstill for nearly four months due to the coronavirus pandemic, according to a report Wednesday from the United Nations Conference on Trade and Development.

The UNCTAD warned that the loss could rise to $2.2 trillion or 2.8 per cent of the world’s GDP if the break in international tourism lasts for eight months, in line with the expected decline in tourism as projected by the UN World Tourism Organisation (UNWTO).

UNCTAD estimates losses in the most pessimistic scenario, a 12-month break in international tourism, at $3.3 trillion or 4.2 per cent of global GDP.

Tourism is a backbone of many countries’ economies and a lifeline for millions of people around the world, having more than tripled in value from $490 billion to $1.6 trillion in the last 20 years, according to UNWTO.

But Covid-19 has brought it to a halt, causing severe economic consequences globally.

Prevailing lockdown measures in some countries, travel restrictions, reductions in consumers’ disposable income and low confidence levels could significantly slow down the sector’s recovery.

Even as tourism slowly restarts in an increasing number of countries, it remains at a standstill in many nations.

“These numbers are a clear reminder of something we often seem to forget: the economic importance of the sector and its role as a lifeline for millions of people all around the world,” UNCTAD’s director of international trade Pamela Coke-Hamilton was quoted in a statement, as saying.

“For many countries, like the small island developing states, a collapse in tourism means a collapse in their development prospects. This is not something we can afford.”

Developing countries could suffer the steepest GDP losses.

Jamaica and Thailand stand out, losing 11 per cent and 9 per cent of GDP respectively in the most optimistic scenario of UNCTAD’s estimates. Other tourism hotspots such as Kenya, Egypt and Malaysia could lose over three per cent of their GDP.

But the tourism sector in many rich nations will also feel the squeeze.

Popular European and North American destinations, including France, Greece, Italy, Portugal, Spain and the United States could lose billions of dollars due to the dramatic drop in international tourism, according to UNCTAD forecasts.

Impact on other sectors, jobs and wages

Travel and tourism account for a significant share of global GDP and more than half of many countries’ national income.

Coronavirus-induced losses in tourism have a knock-on effect on other economic sectors that supply the goods and services travellers seek while on vacation, such as food, beverages and entertainment.

UNCTAD estimates that for every $1 million lost in international tourism revenue, a country’s national income could decline by $2 million to $3 million.

The massive fall in tourist arrivals has also left a growing number of skilled and unskilled workers unemployed or with less income.

UNCTAD estimates show that in the worst-affected countries, such as Thailand, Jamaica and Croatia, employment for unskilled workers could decrease at double-digit rates even in the most moderate scenario.

In the case of wages for skilled workers, the steepest drops could be seen in Thailand (-12 per cent), Jamaica (-11 per cent) and Croatia (-nine per cent), in the optimistic case, doubling or tripling in the worst scenario.

The effects could be particularly negative for women, who are expected to be disproportionately affected by layoffs in tourism due to Covid-19, according to the report.

Women are more likely than men to be entrepreneurs in tourism and make up about 54 per cent of the workers in the accommodation and food services sectors.

And because many women in the sector work informally in low-skilled jobs, they are less likely to have unemployment benefits or other safety nets.

“This is why women are particularly hard hit in this crisis. And this is why policies that help protect the sector also protect the economic empowerment that many of these women have long fought for,” Coke-Hamilton said.

Maldives continues to suffer

The UNCTAD report shows that inbound tourism accounts for 58 per cent of the Maldives GDP.

The report, however, does not specify the impact of Covid-19 on Maldives tourism and its economy.

The coronavirus outbreak has hit the Maldivian economy hard, as travel restrictions and other preventive measures affect the country’s lucrative tourism industry, which contributes the bulk of the island nation’s state revenue and foreign reserves.

Before the pandemic, the government had been bullish about tourism prospects, targeting two million, high-spending holidaymakers this year after last year’s record 1.7 million.

However, only 382,760 tourists visited the Maldives before the country closed its borders on March 27. It was a 40.8 per cent decline over the 646,092 that visited the Maldives from January to March last year.

With arrival numbers falling, several resorts across the Maldives suspended operations.

Tourism has been the bedrock of the Maldives’ economic success. The $5 billion-dollar economy grew by 6.7 per cent in 2018 with tourism generating 60 per cent of foreign income.

However, the government is at present projecting a possible 13 per cent economic contraction this year — an estimated $778 million hit.

On March 8, Maldives reported its first cases of the novel coronavirus, as two hotel employees tested positive for Covid-19 at a luxury resort in the archipelago.

Eighteen more cases — all foreigners working or staying resorts and liveaboard vessels except five Maldivians who had returned from abroad — were later identified.

A six-case cluster of locals, detected in capital Male on April 15, confirmed community transmission of the coronavirus. Several more clusters have since been identified, bringing the total number of confirmed case in the Maldives to 2,382.

Ten deaths have been reported and 1,954 have made full recoveries.

The Maldives announced a state of public health emergency on March 12, the first such declaration under a recent public health protection law.

The public health emergency declaration allowed the government to introduce a series of unprecedented restrictive and social distancing measures, including stay-at-home orders in capital Male and its suburbs, a ban on inter-island transport and public gatherings across the country, and a nationwide closing of government offices, schools, colleges and universities.

Non-essential services and public places in the capital such as gyms, cinemas and parks were also shut.

Restaurants and cafes in the capital were asked to stop dine-in service and switch to takeaway and delivery.

A nationwide shutdown of all guesthouses, city hotels and spa facilities located on inhabited islands was also ordered.

These measures allowed authorities to contain the outbreak.

The restrictions are now being eased in phases, with the third phase kicking in from Wednesday.

The Maldives is also preparing to reopen its borders on July 15.

Recovery support needed

UNCTAD calls for strengthened social protection in the affected nations to prevent the worst economic hardship for people and communities that depend on tourism.

It urges governments to protect workers. Where some enterprises are unlikely to recover, wage subsidies should be designed to help workers move to new industries.

Governments should also assist tourism enterprises facing the risk of bankruptcy, such as hotels and airlines. One approach for financial relief is low-interest loans or grants, the report states.

In addition, UNCTAD calls on the international community to support access to funding for the hardest-hit countries.

Cover photo: Mihaaru News