Almost a year ago, the COVID-19 virus closed down economic activity throughout the world. Among the first countries to shutdown completely were Europeans. Those looking back to March-April last year may remember that while the Italians and Spaniards were under complete lockdown, the United States economy remained open/.
As it turned out, the virus’ spread slows down during warm weather and spreads faster when temperatures fall. European nations recovered the lost ground partially, but only with the help from governments and the European Commission. In other words, they survived by receiving money borrowed or printed.
While it was imperative to do so, time has passed, and we are now almost a year into the pandemic. For many European economies, even assuming that the virus goes away tomorrow, it will take years to reach their pre-pandemic level.
Years of Economic Struggle Ahead
Consider the Spanish economy. The tourism sector is its backbone. The famous tapas and cafes at each corner are the attraction and envy of many nations.
In the first nine months of last year, the international tourist expenditure in Spain dropped by a whopping $73 billion when compared to a similar period in 2019. As the new year started with more lockdowns, expect the same, or not even worse, to happen in 2021.
Let’s say, for the sake of running some numbers, that in 2021 Spain loses another $73 billion in potential revenue from the tourism sector. In total, about $150 billion. But this is only one sector and accounts only for the money not spent by visitors. If visitors do not arrive, locals lose their jobs – and in the end, businesses will close too. A vicious circle starts, and suddenly we do not talk about “only” $150 billion but about much, much more.
Now let’s move to France. Paris is the most visited city in the world, with only the Tour Eiffel generating huge amounts of money each year as it receives millions of tourists. One can imagine how empty the place was/is during the pandemic.
As the rolling out of the vaccines started, and the first jabs are already injected, Europe sees the light at the end of the tunnel somewhere in the second half of the year. Judging by how slow the process goes, it will probably be towards the end of the year when everyone that wants to be vaccinated will be able to do so.
But will tourists start coming in the same numbers right from the end of the pandemic? Unlikely. Caution will dominate for years until the world learns more about the virus.
Having an objective perspective is healthy for good planning. We may have found a solution to stop the virus, but we are far from finding a solution to create jobs and reach the lost economic growth as fast as finding a cure for the virus.