The International Monetary Fund has predicted that southern Europe will be among the hardest-hit economies in the world, particularly Greece, Italy, Portugal and Spain – all still picking themselves up after the last crisis.
Greece is expected to take the biggest hit with a 10pc plunge in GDP this year, despite the speedy response of its government in controlling the virus. Cases and deaths there are a fraction of those seen in Spain and Italy, but it is the most reliant on tourism revenue except for Cyprus.
It will be a crushing blow to Kyriakos Mitsotakis’s new business-friendly government, which had hoped to kickstart growth again and revive a stalling economic recovery in 2020. Debt in Greece, which had hoped to gain looser terms from its creditors this year, is expected to near or even surpass 200pc of GDP – a debt mountain second only to that of Japan.
Elsewhere, tourism hotspots Spain and Portugal are expected to suffer a 8pc plunge in GDP each while Italy will suffer a 9.1pc drop in output. Of the winter destinations, Austria is the most exposed if the Covid-19 crisis spills over into the skiing season.
Morgan Stanley economist Jacob Nell says the blow to tourism will be a key factor differentiating the economic damage across Europe. Economies where social consumption, such as tourism, accounts for a higher share of output will be “more adversely impacted”, he says.
More manufacturing-focused economies such as Germany will be less exposed as factories reopen. Total tourism consumption, including inbound and domestic tourism, is equivalent to 14pc of GDP in Greece and 12pc in Spain and Portugal, according to Jefferies.
In the UK and Germany the proportion is still relatively high at 8.9pc and 7.1pc, respectively, but more than 80pc of that consumption is from domestic tourists. Just 30pc of tourism consumption comes from the Greeks and Portuguese in their respective countries, meaning their industries are heavily reliant on foreign visitors.
While tourism would be hit in a normal recession putting the squeeze on household incomes, the confidence of holiday-goers will be crucial in the industry’s recovery in 2021. If a vaccine is not ready for next summer and the threat of another wave of infections lingers, tourists may be hesitant to return to Europe’s beaches.