Discussion paper

DP16738 The Travel Shock

The COVID-19 pandemic has led to a collapse in international travel and tourism. This paper explores how the cross-country impact of the pandemic relates to countries’ dependence on these activities as a source of revenue. It first documents the size of the shock to net revenues from international travel and tourism for the balance of payments. For the median highly tourism-dependent economy the shock exceeded 10 percentage points of GDP, leading to a sizable current account deterioration. Indeed, empirical evidence suggests that current account adjustment in 2020 relative to pre-crisis forecasts was driven to an important extent by the collapse in revenues and expenditures on international travel as well as by the collapse in oil prices. On the economic growth front, the paper shows that the share of tourism activities in GDP is the single most important predictor of the growth shortfall in 2020 triggered by the COVID-19 crisis across the world as well as within the eurozone, even when compared to a variety of measures of the severity of the pandemic.


Milesi-Ferretti, G (2021), ‘DP16738 The Travel Shock‘, CEPR Discussion Paper No. 16738. CEPR Press, Paris & London. https://cepr.org/publications/dp16738