Lower global mobility will continue to weigh down international economy: Barclays
A Barclays report released earlier this week found that limits on global mobility resulting from the pandemic will continue to depress economic growth for the near future.
The 37-page report reviews the extent to which the pandemic limited travel and the resulting economic ramifications. “Global mobility directly powered about 10% of global GDP before the pandemic,” the report said. “The damage will not be confined to 2020, but will linger.”
Even after the rollout of vaccines and the lifting of some restrictive travel policies, significant obstacles to spur-of-the moment traveling remain. “A state of persistent pandemic may render some border restrictions permanent, making international travel more difficult. Impulsively booking a last-minute trip on a low-cost carrier may no longer be viable in such a scenario between and to some countries,” the authors wrote.
In order to ease travel restrictions, governments will require not only the containment of the virus but also the vaccination of its people and the attainment of herd immunity. “Efforts to reopen international borders are also increasingly focused on vaccinations as a criterion for travel,” the report said.
Even after the developed world reaches herd immunity, however, governments will likely practice caution with regard to travel restrictions as “not only is the pace of vaccination likely to stay uneven, there is still substantial uncertainty over the efficacy of these vaccines against new variants of the coronavirus.”
Travel restrictions have been eased throughout 2021, though new case surges in India and elsewhere have halted progress in recent weeks.
The United Kingdom’s Health Secretary Matt Hancock recently expressed uncertainty regarding whether the country would be able to proceed with reopening the economy on June 21 as previously planned, in light of the spread of the virus variant first identified in India to the UK.
Obstacles to travel remain
The services sector, which includes travel and tourism, was the first sector to be hit and likely will be the last to recover, the report found.
The report states that developed economies, which are ahead in vaccine distribution and inoculation, will be among the first to resume travel, whereas emerging economies, which have “struggled to secure vaccine supplies,” will likely be slower to do so.
Several obstacles to reaching normal levels of travel remain. According to the World Tourism Organization, 69 economies had their borders closed to foreigners, as of February 1.
Governments around the world have adopted the World Health Organization’s recommendation for 14 days of quarantine for travelers, a period of time that, according to Barclays, “likely exceeds the overall length of most pre-COVID travel.”
The report noted that China represents a large share of the world’s outbound tourist spending - nearly double the size of the US’ - and that China has created certain policies for jumpstarting tourism. The “international travel health certificate”, introduced on March 8, is one such method that uses a vaccine passport to restrict travel to vaccinated citizens.
Other findings of the report include a severe impact of the pandemic on the hospitality industry. In 2020, the output of accommodation and food services fell sharply, ranging from a 10% y/y contraction in China and Indonesia to a 40% decline in the case of Poland, the UK, and Mexico. The losses endured by the hospitality industry, which accounted for 3.2% of GDP in 2019 but over 10% of the total employed, is particularly disruptive to the labor market.
Visions of a total economic revitalization by this summer are unlikely to come to fruition. “A meaningful recovery is only likely to take place towards the later part of 2021 or even 2022,” the report says, “and will be highly contingent on the progress towards reopening international travel borders.
The report, written by debt research analysts Rahul Bajoria, Angela Hsieh, Brain Tan, and Shreya Sodhani, was released on May 25.
Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.
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