DBRS: Covid-19 Shock Greater for Tourism-dependent Greece

Greece will emerge as one of the hardest hit economies by the coronavirus (Covid-19) pandemic due to the impact of restrictions on its main revenue-generating industry – tourism, according to a DBRS Morningstar report released this week.

The global credit rating agency found that Southern European economies will face the greatest challenge in recovering after Covid-19 and warns that sole reliance on tourism should be re-examined.

More specifically, according to its tourism and Covid-19 vulnerability assessment for the euro area, Greece is the most vulnerable economy impacted significantly by the slowdown in tourism, followed by Cyprus, Malta, Portugal, Spain and Italy.

DBRS findings indicate that Greece’s tourism sector accounts for 20.8 percent of GDP and 21.7 percent of employment.

Least vulnerable according to the same report are Germany, Belgium, Finland, France and Slovakia, which rely much more heavily on industry and other non-tourism services.

“The high reliance on the travel and tourism sector, and the spill over on the broader economies of the Southern European countries may contribute to an unequal recovery in the euro area even as economies continue to open up,” said Javier Rouillet, vice president at DBRS Morningstar.

It should be noted, that vulnerability assessment does not include the offsetting impact of government support measures aimed at protecting jobs and providing liquidity to businesses, including tourism specific measures.

The ultimate economic impact will depend on the evolution of the pandemic, the restrictive controls, including duration and permanency of travel restrictions and quarantines, as well as national recovery policies to
ease the impact of the shock.

“Depending on the evolution of the virus, prospects for next year may also be severely affected. Factors such as the business environment, transport and tourist service infrastructure, natural and cultural offerings, safety and security and price competitiveness could be important in facilitating the recovery in the tourism industry,” said Spyridoula Tzima, assistant vice president at DBRS Morningstar.