title: Economy-wide Impacts of COVID-19 pandemic on tourism: A case study of Sri Lanka
Creators: name: Wickramasinghe, Govinnage K
Publisher: name: Griffith University
Year: 2023
Subjects: subject: tourism economics
subject: CGE modelling
subject: COVID-19 pandemic
subject: economic resilience

description: Tourism lies among the industries which have been most severely impacted by the COVID-19 pandemic, the economic effects of which have been most acute in small economies with a heavy dependence on international tourism. Due to the significant backward linkages of tourism, these negative effects have transferred to other industries in the form of indirect and induced impacts. As such, the pandemic has had a significant impact upon tourism employment, although there is limited specific evidence for this with regard to vulnerable employment groups. In pandemic-affected tourism economies searching for potential recovery strategies, the promotion of domestic tourism emerged as an immediate strategy while restrictions remained on international travel. At a later stage, these countries adopted various strategies to facilitate safe travel and recommence international tourism. At present, however, there is a dearth of empirical research on the economic benefits of these strategies from around the world. Strategies designed to promote recovery and resilience following economic shocks such as the pandemic must be based on comprehensive research-based information. However, the existing literature on economy-wide assessments of tourism has paid little attention to developing and emerging economies. This research aims to address this gap by conducting a case study of Sri Lanka, a small economy with substantial dependence on international tourism as a source of foreign exchange earnings and employment. When the pandemic began in early 2020, Sri Lanka’s tourism industry was still recovering from the Easter Sunday terror attack of April 2019. The resultant decline in international tourism was a major contributing factor in the economic crisis that emerged earlier in 2022. Tourism in Sri Lanka has been negatively affected by fuel shortages, civil unrest, and supply chain disruptions during this crisis period. Having been significantly affected by multiple crises over a three-year period, Sri Lanka presents a unique case for assessing the economy-wide impacts of shock events and potential recovery strategies. The overall aim of the thesis is to assess the economy-wide impacts of the pandemic on Sri Lankan tourism and potential recovery strategies. More specifically, it aims to examine the economic impacts of the pandemic at the macroeconomic and industry levels, assess the potential role of domestic tourism promotion in compensating for the reduced benefits of international tourism, assess the impacts on different employment categories, and derive improved forecasts for international tourism. The economy-wide assessments in the thesis are based on the computable general equilibrium (CGE) framework, and employ a standard ORANI-G single-country model. Since standard CGE models do not tourism as a separate industry, this thesis develops a tourism CGE model that incorporates both international and domestic tourism segments. The latest input–output table developed by the Department of Census and Statistics of Sri Lanka is used as the primary database for the model. The analysis is based on a short-run macroeconomic environment. The first study employs univariate and multivariate time-series forecasting models to produce improved forecasts for international tourism in Sri Lanka. The analysis is based on international tourist arrivals and international guest nights by major source regions. The explanatory variables of the model include Google search data and structural dummies. Monthly data from 2004 to 2019 is used in the models. The results indicates that seasonal autoregressive moving average with explanatory variables (SARMAX) models with internet search data and structural dummies as explanatory variables outperform their counterparts. A hypothetical scenario of domestic tourism promotion is simulated to assess the degree of compensation from domestic tourism that is required to offset foregone economic gains from international tourism. The thesis presents two simulation experiments using the tourism CGE model, which are designed to capture the economy-wide impacts of the pandemic on tourism and potential gains from domestic tourism promotion. The findings indicate that, at the macro level, domestic tourism can provide some level of economic stimulus following the pandemic. The industry-level analysis points out that non-tradable industries receive benefits through domestic tourism promotion. This suggests a reverse Dutch disease effect on tourism. This thesis also focuses on assessing the labour market impacts of the COVID-19 pandemic shocks on tourism in Sri Lanka. Sri Lanka is characterised by a significantly low level of female representation in the tourism industry as well as in the overall economy. The employment component of the CGE model was disaggregated based on gender and six employment categories to develop a gender-aware tourism CGE model. The model captures the full impact of the COVID-19 shock on employment as the shock transmits from tourism to the rest of the economy. The results indicate differential employment impacts across gender and employment groups. Temporary workers are the most vulnerable employment group among male workers, whereas own-account workers are the most vulnerable employment group among female workers. Overall, the research presents empirical evidence that can aid policymakers in in guiding recovery and resilience in tourism. The findings are also useful in lending insights into Sri Lanka’s economic crisis through a tourism lens. Finally, although this research focuses on Sri Lanka, the evidence presented here may be useful in addressing tourism crises in other national contexts after necessary modifications have been made.