Italy, with 6% of its GDP dependent on tourism, is already beginning to feel the effects that the Coronavirus is having on the sector. Spain, with 14.6% of its GDP dependent on the sector, could experience a similar situation; or worse.
The effects of the Coronavirus have already begun to spread throughout the planet. If we look at the number of infected, we can see how the epidemic is gaining weight, while media alarmism secluded people in their homes, afraid of “deadly contagion” that does not cease to take lives as the days go by. The situation, although not catastrophic, has become a real catastrophe.
The excessive panic that is spreading all over the world is already having its effects on the economy. If one stops to look at the figures for world activity, these have not been very buoyant throughout the past year. The trade war, which was fought on the global market, caused a sharp and intense slowdown in economic activity, at least in terms of international trade flows.
A situation that has been postponed by the Coronavirus. A week after the American President, Donald Trump, and the Chinese President, Xi Jinping, signed the first phase of the trade agreement, putting an end to the much-feared trade war, the Coronavirus came into play. As I was saying, just a week after the agreement, the Coronavirus began to gain more and more presence in Asian territory, infecting every living thing that crossed its path.
The immediate action of the Asian government, as well as of the different governments, began with the complete closure of the traffic and flow of people between territories. In order to avoid further contagion, the blockade of the borders was the star measure to at least contain the contagion to other neighbouring and not so neighbouring countries. A closure that, as is evident, has its effects on the economy, as well as on sectors within the economy that are most affected by the intense activity that they now lack.
This is the case with Italy. If we look at its gross domestic product, for example, foreign trade, exports, have become a great tool for the Italian economy. In a matter of years, exports have gone from representing about 28% of Italy’s GDP to 31%. To get an idea, about one third of the Italian economy is directly linked to the foreign sector.
However, if we look at the foreign sector and observe the situation, we can see how a large part of the Italian economy is directly dependent on the foreign sector. If the latter, in the economic scenario, is severely shaken and paralysed by the effects of a pandemic, we can imagine what happens to the Italian economy. We are talking about nothing less than a large lung for the transalpine economy, which is currently operating below capacity.
But not everything is industry and the foreign sector for the Italians. If there is one thing that characterises the country, it is its great tourist power. Italy is a country that, year on year, receives a large number of tourists a year. This amount also leads to a relationship of income that directly generates visits to the country. However, as we were saying, if anything has been blocked since the appearance of the Coronavirus, it has been tourism.
With approximately 128 million tourists a year, Italy is a major tourist power. In 2018, tourists spent about 42 billion euros in the country, as the Bank of Italy has already announced. In view of the stagnation that the tourism sector is experiencing on the planet, these figures could be shaken during this year. The expansion of the virus and the fear of the citizens, as well as the governments, has caused a great decrease in the geographic mobilization for tourism.
And it is precisely here that I want to make the Spanish economy spin. If we look at the situation in Italy, one can get an idea of how easily this scenario can be replicated in Spain. Spain, just like – and even more so than – Italy, is a country with a large part of its economy dependent on the tourism sector. Tourism for Spain is a crucial sector, so much so that the sector, in our economy and unlike Italy, represents almost double, if we contrast the tourism/GDP ratio.
With an annual contribution of 178 billion euros, tourism has become one of the main sectors for the Spanish economy. We are talking about 14.6% of the Spanish GDP which is directly dependent on the tourism sector. With this weight, Spain is the country, of the OECD member countries, in which tourism has a greater weight in the GDP. With these data in hand, it is impossible to deny that Spain must be concerned about any situation that might affect a sector that we could already consider of vital importance to our economy.
In short, Italy has brought its tools to bear. The members of the Italian Government, in a scenario where they have just had a rather bad time, and are on their way to a new technical recession, have already begun to devise alternatives that could alleviate the situation. They have even considered the option of eliminating taxation, excluding those centres where the Coronavirus is most present from their tax obligations. And well, all this with a tourism that represents 6% of its gross domestic product, because let’s remember that in our country it represents about 15%.
Therefore, and in view of this scenario, one wonders: And, Spain, why not?
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Francisco Coll MoralesEconomist
