Dubai: The impact of COVID-19 on the Middle East and North Africa (Mena) Tourism sector, especially on the oil importers will pose huge challenges to their economies, according to Institute of International Finance.
The pandemic has hit tourism in these countries so hard that there has been a deep contraction in the contribution of the sector to these economies.
Before the crisis hit, tourism contributed directly and indirectly to more than 15 per cent of GDP and 35 per cent of foreign exchange earnings in Jordan, Lebanon, Egypt, Morocco, and Tunisia. Data from the IIF show, n average, tourist receipts fell by 75 per cent in 2020 compared with 2019.
The IIF sees bleak outlook for tourism in the region.
“We expect the five tourism-dependent MENA economies to suffer much longer than the six GCC countries from the negative impacts of the pandemic," said Garbis Iradian, Chief Economist Mena, IIF.
"Partial data for the first quarter of this year shows that the number of tourist arrivals to the Mena countries were just 25 per cent of what they were in Q1 2020, and recent increases in COVID-19 cases in key source markets, including the EU, will delay the partial recovery to the second half of this year.”
The recovery in the tourism sector in the region is not expected to return to pre-pandemic levels until 2023. Tourists from the EU, UK, Russia, and the USA may be enticed by other countries in the Mediterranean region, with low-cost brands (Turkey), or to continue to focus more on domestic trips or nature in countries where they reside. Downside risks to a projected strong recovery in tourism in 2022 include virus mutations and slow vaccine rollout.
We expect the five tourism-dependent MENA economies to suffer much longer than the six GCC countries from the negative impacts of the pandemic.
The IIF sees the possibility of Egypt, Jordan, Tunisia and Lebanon facing repeated outbreaks before vaccines become widely available, limiting the chance of herd immunity before end-2022. Conversely, speedier vaccine delivery and distribution could accelerate the move to a post-pandemic world.
“The speed of recovery will depend on the progress made in vaccination and quality of healthcare systems. German, French, UK, Russian, and GCC nationals, who combined ac-counted for more than 70% of the number of tourist arrivals before the pandemic, may now opt to spend their vacations in countries where the health system is reliable, and the COVID-19 vaccination rate is relatively high,” said Iradian.
The tourism sector was a key engine of job creation in this group of countries. With the pandemic, about one in six jobs vanished in 2020. Unemployment rates, which were already high before the pandemic, reached 25 per cent in Jordan, 18 per cent in Tunisia, 14 per cent in Morocco, and 12 per cent in Egypt. Lebanon’s un-employment reached 37 per cent, also reflecting the broader col-lapse of the economy due to country-specific factors.
“While the MENA tourism-dependent economies entered the pandemic with limited fiscal space, they could learn from the policy measures implemented in other countries. Several emerging and developing economies have been providing financial support to the tourism sector and assisting firms to adapt their business models and retain staff,” said Iradian.
Case for government support
In Thailand, for example, the government allocated $700 million (2 per cent of GDP) to boost domestic tourism. In Barbados, the government maintained social spending and raised capital spending in non-tourism sectors such as agriculture and infrastructure development to create new jobs. Georgia and several islands in the Caribbean region are offering new long-term stay permits to entice foreign visitors to bring their virtual offices with them and spend in local economies.
The IIF said technology could also play an important role in the revival of the sector. With social distancing and hygiene protocols in place for the next few years, contactless service delivery and investment in digital technology could be a bridge to recovery but require a reorientation of job creation into new categories.
Beyond the initial response designed to accelerate vaccination distribution, the authorities in the MENA region need to develop long-term policy solutions to heal the scars of the pandemic by strengthening healthcare systems, investing in new technologies, and diversifying within and away from the tourism industry.