Instead of thinking of tourism as people visiting a country, consider the money they spend.
By diminishing tourism, Covid-19 has hit several economies especially hard.
Because of the pandemic, lockdowns, flight cancellations, and border closures have multiplied. A local lockdown means no one enters or leaves. When flights are cancelled, it’s tough to get somewhere even after the lockdown has ended. Add to that border closures and you get a substantial plunge in tourism.
The IMF predicts a 70 percent drop in tourism revenue for Costa Rica, Greece, Morocco, Portugal, and Thailand during 2020. The result could be a major hit to each one’s GDP that exceeds 3 percent.
Our Bottom Line: Measuring Trade
The Current Account
Sort of like income statements and balance sheets tell us how a business is doing, a country’s current account keeps track of its trade activity. Measuring a country’s transactions with all beyond its borders, the current account balance includes trade in goods, services, and tourism (but not the financial transactions that are counted by the capital account). When more is sold to other countries, then the current account moves higher on the plus side whereas less sold creates the opposite. With tourism, we have the equivalent of an export that brings money into a country. If the revenue from tourism goes down at places like hotels, restaurants, and theme parks, then the current account is tugged toward minus territory.
Below on the IMF graph, because the countries on the x-axis are tough to see, I’ve listed the bottom and top 10 at both ends:
At the same time, we are measuring the impact on the GDP. As a yardstick of the money value of the goods and services produced in a country, the GDP includes exports minus imports. With tourism as an export, less money spent in a country pulls the GDP lower. For countries with smaller GDPs, the tourism hit can be relatively large.
And that returns us to Costa Rica, Greece, Morocco, Portugal, and Thailand.
My sources and more: Focusing on important issues that are not in the headlines, IMF blogs come in handy. Their August 20 Chart Of The Week grabbed my attention. Our featured image is from Pixabay.