By Tom Arnold and Karin Strohecker

LONDON (Reuters) – New COVID-19 outbreaks and travel edges are preventing tourists from returning to Thailand’s beaches and Turkish bazaars, preventing a recovery in tourism, a major source of foreign exchange and a major employer for many emerging markets.

According to the World Travel & Tourism Council (WTTC), global tourism suffered its worst year ever in 2020. The value of the sector fell by an estimated $ 4.5 trillion after the pandemic.

The extent of the recovery in 2021 is still pending.

However, with every third country and territory in the world closed to tourism, key sources of tourists like the UK ruling out outbound travel to most countries and the flare-up of new viruses in popular travel destinations like Thailand, the outlook is bleak.

Tourism could revive in either July or September, estimates the United Nations World Tourism Organization (UNWTO), but warns that in either scenario, arrivals would still be less than half of 2019 levels.

Emerging economies, which are generally more dependent on tourism than their developed counterparts, are most susceptible to the disruption.

Their lagging vaccination rates compared to their peers add to the pressure.

Tunisia and Egypt have vaccinated less than 5% of their populations, compared to rates of 20-30% in the Mediterranean basin in Greece, Italy and Spain.

“It is indeed a hidden risk factor for several emerging economies in economic, social and political terms, as it is difficult to lose two seasons in a row after a difficult 2020,” said Sergey Dergachev, fund manager at Union Investment.

(Chart: Immunization Rates in Emerging and Developed Travel Destinations, https://fingfx.thomsonreuters.com/gfx/mkt/ygdpzoknwvw/Capture.PNG)

FRAGILE FOUR

Turkey, Egypt, Tunisia and Sri Lanka are among the most vulnerable countries. All four countries are heavily dependent on tourism to replenish their foreign exchange reserves.

A recovery in Turkey’s current account deficit, which rose to $ 3.3 billion in March, depends on a recovery in tourism as higher energy prices boost import costs.

Both Britain and Russia have effectively prevented citizens from traveling to Turkey for the time being. Even under an optimistic tourist recovery scenario in the second half of the year, Barclays predicts that Ankara may need to plunge into valuable foreign exchange reserves to fund part of its $ 21 billion deficit.

Egypt is expected to receive a boost from resuming flights from Russia after a five-year hiatus after militants shot down a Russian jet in October 2015. However, this is being hampered by the weakness of its two main sources of foreign exchange – tourism and Suez Canal revenue – in Egypt. Current accounts estimates will remain below 2019 levels for the next two years, S&P Global estimates.

Similar to Egypt, tourism accounts for more than a third of hard currency gains in Tunisia, whose economy is expected to grow only 3.8% in 2021 after a sharp decline in 2020.

“This (tourism) is a big issue for any country with a current account deficit,” said Guillaume Tresca, senior emerging market strategist at Generali Asset Management.

“When you think of tourism in emerging markets, you have to focus on weak countries with weak external balances that depend on tourism – Tunisia, Turkey, Egypt.”

The Sri Lankan government, which had largely hoped for a revitalization of tourism, saw tourism revenues decline nearly 10% in April compared to the previous month, and newcomers from India have been banned since the beginning of this month.

(Graphic: Fragile checking accounts make some tourist hotspots vulnerable, https://fingfx.thomsonreuters.com/gfx/mkt/azgvogajnvd/Capture.PNG)

LIFE

According to estimates by the WTTC, up to 62 million jobs were lost in all global travel and tourism markets in 2020.

The replacement of many of these jobs, as well as the security of others in emerging markets, depend in large part on how the summer season develops.

Small island states like Antigua and Barbuda, Aruba and St. Lucia, which account for more than two-thirds of total tourism employment, are most at risk from a slow resumption of tourism.

S&P Global Ratings downgraded Aruba’s sovereign credit rating by one notch from BBB + to BBB in March, warning the government that it would likely lean more on loan spending and increase debt.

With unemployment already in double digits in many countries and facing the pandemic, analysts warn of the risk of new social unrest that could emerge a decade after the protests that blossomed in the Arab Spring.

(Graphic: Employment in tourism in emerging countries (% share of total employment, https://fingfx.thomsonreuters.com/gfx/mkt/yxmvjoyyypr/employment.PNG)

(Adaptation by Toby Chopra)

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