Small countries in the Balkans and South Caucasus are most exposed to the expected collapse in tourism revenues this year, as the coronavirus (COVID-19) pandemic shuts down international and domestic travel.
In several countries in these subregions, tourism accounts for some of the largest shares of GDP in all of Central, Eastern and South-Eastern Europe and Eurasia, according to a global survey by the World Tourism Council. Travel and Tourism (WTTC) published in 2018.
Tourism — taking into account direct and indirect effects — accounted for 31% of GDP in Georgia and around a quarter in Albania (26.2%), Croatia (25%) and Montenegro (23.7%).
The main countries of Central, Eastern and South-Eastern Europe as well as Eurasia are ranked according to the total contribution of tourism to GDP. Source: WTTC
The sector has also been a major contributor to GDP, accounting for around 15% of the total in Armenia (15.7%), Estonia (15.4%) and Azerbaijan (14.6%).
If we only consider the direct contribution of the tourism sector to GDP, the largest share is in Montenegro (11%), followed by Croatia (10.9%) and Georgia (9.3%) .
The main countries of Central, Eastern and South-Eastern Europe as well as Eurasia are ranked according to the direct contribution of tourism to GDP. Source: WTTC
In Turkey, one of the region’s largest economies, the WTTC estimates the travel and tourism sector’s contribution at 11.6%, although other estimates put it considerably higher, up to 20%. In absolute terms, WTTC valued Turkey’s tourism sector at $94 billion in 2017.
Ratings agency Moody’s said on March 25 that it expects the Turkish economy to be the hardest hit of all G20 economies by the impact of the coronavirus economic shock, with a cumulative contraction of 7% of GDP in the second and third quarters of this year. “The shock will likely have serious consequences for Turkey’s tourism-related sectors throughout the summer,” the rating agency commented.
Two days earlier, Capital Economics lowered its 2020 GDP growth forecast for Turkey to a 2% contraction, highlighting that Turkey is particularly vulnerable to the damage that will be caused to the tourism industry with many countries introducing almost total bans on commercial flights. and vacationers are canceling their vacations en masse.
Currently, as the coronavirus spreads rapidly around the world, populations in many countries are under lockdown and strict limits on travel, including international travel, have been imposed.
Airlines are canceling flights, with Wizz Air reporting on March 24 that it was operating at just 15% capacity. The airline said grounding all of its planes was a “distinct possibility” as new travel restrictions and social distancing policies could make international flights for commercial purposes “untenable, if not impossible.”
Aeroflot and other Russian carriers also cut capacity on international flights in March, although not as sharply as Wizz Air. But all international flights to and from Russia are now canceled as Moscow steps up its response to the coronavirus.
Other airports and carriers have already completely or almost completely suspended traffic. Airports in Belgrade and Ljubljana were both temporarily closed, with Serbian national carrier Air Serbia only operating rescue flights for Serbs stranded abroad. The Romanian national airline Tarom has suspended its domestic flights for 14 days as well as its flights to and from countries where the coronavirus epidemic is the most significant.
It is also virtually impossible for would-be vacationers to plan their summer vacations, as no one can accurately predict how long it will take for the spread of the virus to peak and restrictions to be lifted. Booking a vacation is the last thing on many people’s minds.
A report from the Center for European Reform think tank predicts that while manufacturing demand is likely to rebound after restrictions are lifted, the same cannot be sad for the services sector. “Here, the recovery will be weaker than in the manufacturing sector: a canceled restaurant visit, concert or holiday trip will rarely be rescheduled,” it said in a report titled “The two economic stages of the coronavirus» published on March 26.
Economists trying to make sense of the future admit that growth projections for this year depend on whether lockdowns are lifted soon enough to allow a return to normal economic activity in the second quarter, or whether the current situation for months.
In countries where tourism represents a significant share of GDP, governments have sought to specifically target this sector by developing economic recovery plans to try to mitigate the fallout from the pandemic.
In Croatia, for example, the recovery plan worth around €4 billion approved earlier this month includes measures to support businesses in the tourism sector as well as measures aimed at the economy as a whole .
As part of Georgia’s recovery plan, all businesses related to the tourism sector will benefit from income and property tax breaks until November 1, while value-added tax refunds (VAT) for businesses would be doubled from 600 million GEL to 1.2 billion ($347 million). Individuals and tourism-related businesses could be allowed to defer interest payments on bank loans for four months.