Tourism puts NZ near top of worst affected economies – OECD

30th March 2020 By Staff Reporter | news@tourismticker.com | @tourismticker

Source: OECD

New Zealand could suffer one of the worst contractions due to the Covid-19 lockdown compared to other countries, according to a new report on the impact of the pandemic.

The Organisation for Economic Co-operation and Development’s (OECD) Evaluating the initial impact of Covid containment measures on activity ranks New Zealand sixth among 47 economies in terms of the outbreak’s drag on activity.

The country could see an overall decline in output and spending equivalent to around 29% of gross domestic product.

“Many countries in which tourism is relatively important could potentially be affected more severely by shutdowns and limitations on travel,” the OECD report said.

Greece, which has a large tourism economy, could suffer the most, losing the equivalent of around 34% of GDP.

The most optimistic figure was for Ireland, losing 15% of GDP.

The report said the slump in tourism and retail spending would have the most effect on GDP due to the Covid-19 lockdowns, compared to other sectors.

“Changes of this magnitude would far outweigh anything experienced during the global financial crisis in 2008-09,” the OECD said.

The initial direct impact of the Covid-19 shutdowns could be a decline in output of between one-fifth to one-quarter of gross domestic product in many economies

Consumer spending was estimated to potentially fall by about one-third overall, and some types of spending would decline between 50% to 100%.

“Taken together [including manufacturing decline] the affected sectors account for between 30% to 40% of total output in most economies.”

Travel restrictions and shop closures were likely to result in some categories of spending being cut back completely – package holidays, clothing, footwear, and household furnishings.

Spending involving direct contact, such as car purchases and hairdressing, were also likely to be postponed completely.

Sharp declines were likely for local travel, restaurants, hotels and recreational services, although they would continue to some extent.

“The scale of the estimated decline in the level of output is such that it is equivalent to a decline in annual GDP growth of up to 2 percentage points for each month that strict containment measures continue,” the report said.

“If the shutdown continued for three months, with no offsetting factors, annual GDP growth could be between 4% to 6% percentage points lower than it otherwise might have been.”

Even once lockdowns were eased, the extent of any recovery in output would depend on policies supporting workers and companies, and return of confidence.

For example, service sectors involving travel, tourism, hairdressing, or house purchases, were clearly affected by restrictions on movement and social distancing

In all economies, the majority of this impact comes from the hit to output in retail and wholesale trade, and in professional and real estate services.

“There are also notable cross country differences, with closures of transport manufacturing being relatively important in Germany, and the decline in tourist and leisure activities being relatively important in Italy…the effect of business closures could result in reductions of 15% or more in the level of output throughout the advanced economies and major emerging market economies.”

The implications for annual GDP growth depended on magnitude and duration of national shutdowns, extent of reduced demand for goods and services throughout economies, and the speed of fiscal and monetary support.

In China, the peak adverse impact on output is already past, with some shutdown measures now being eased.