Unlocking Economic Potential: The Impact Of Tourism On Gdp Growth In Developing Nations

Developing countries are emerging as the important players, and increasingly aware of their economic potential. Once essentially excluded from the tourism industry, the developing world has now become its major growth area. These countries majorly rely on tourism for their foreign exchange reserves. For the world’s forty poorest countries, Tourism is the second-most important source of foreign exchange after oil. It is not unknown that Travel & Tourism not only enable socio-economic development, job creation and poverty reduction but drives prosperity and significant positive social impact, providing unique opportunities to women, minorities, and young people. The benefits of Travel& Tourism spread far beyond its direct impacts in terms of GDP and employment, with indirect gains extending through the entire travel ecosystem as well as the supply chain linkages to other sectors .    

Prior to the pandemic, Travel & Tourism was one of the world’s largest sectors, accounting for 1 in 4 of all new jobs created in the world, 10.3% of all jobs (333 million), and 10.3% of global GDP (USD 9.6 trillion). Meanwhile, International visitor spending amounted to USD 1.8 trillion in 2019 (6.8% of total exports). While 2021 saw the beginning of the recovery for the global Travel & Tourism sector, this was slower than expected, due in part to the impact of the Omicron variant, stringent and inconsistent border restrictions and the lack of coordination among governments to tackle the pandemic. As per one of the reports submitted by WTTC, Travel & Tourism’s contribution to GDP increased by USD 1 trillion (+21.7% rise) in 2021 to reach USD 5.8 trillion, while the sector’s share of the whole economy increased from 5.3% in 2020 to 6.1% in 2021.

Additionally, the sector also saw the recovery of 18.2 million jobs, representing an increase of 6.7%. Representing more than just economic strength, these figures exemplified the vast potential of tourism, to address some of the world´s most pressing challenges, including socio-economic growth and inclusive development. Asia-Pacific was forecasted to be the first region to revert to the 2019 scenario (in 2023), while all the other regions estimated to recover completely in 2024. In 2022, as travellers confidence improved, the global Travel & Tourism hastened its pace  of recovery to 43.7% compared to 2021 and added a further 10 million jobs. It was also predicted that, the sector may return to pre-pandemic levels around the end of 2023 and the preliminary data for the first half of 2022 supported this forecast.

The future outlook also looks  positive, and tourism is  showing its resilience and ability to bounce back. Despite the difficulties the sector has been facing, projections by experts point to a strong decade of growth. Travel & Tourism GDP is set to grow on average by 5.8% annually between 2022 and 2032, outpacing the growth of the overall economy (2.7% per year). There was a forecast by experts that Travel & Tourism GDP could return to 2019 levels by the end of 2023. What is more is that  the sector is expected to create nearly 126million new jobs within the next decade .It was also predicted many of these new jobs will be concentrated in the Asia-Pacific region (64.8%) in general, and China (25.5%) and India (20.4%) (Concerned Report of WTTC)

Tourism can indeed be a significant accelerator of GDP for third-world economies, but the extent to which it affects GDP depends on various factors including the country's infrastructure, policies, attractiveness as a tourist destination, and global economic conditions. It contribute to GDP growth in third-world economies by bringing foreign exchange earnings when tourists spend money on accommodations, food, transportation, souvenirs, and other goods and services. This directly contributes to the GDP of the country. Tourism creates jobs directly in sectors such as hospitality, transportation, entertainment, and retail. Additionally, there are indirect jobs generated in related sectors such as agriculture and handicrafts to support the tourism industry.  To attract tourists, countries often invest in infrastructure development such as airports, roads, hotels, and recreational facilities. This not only supports tourism but also contributes to overall economic development .The money spent by tourists circulates in the economy, leading to a multiplier effect. Many third-world countries are rich in cultural heritage and natural beauty. Tourism can help in preserving and promoting these assets, generating revenue from cultural attractions, museums, heritage sites, and ecotourism.

One has to appreciate, Tourism can be sensitive to external factors such as Economic Downturns, Natural Disasters, Political Instability, And Health Crises (As Seen During The COVID-19 Pandemic). Over-reliance on tourism leaves the economy vulnerable to these shocks. We need to remember all the the time that Unregulated tourism can lead to environmental degradation, depletion of natural resources, and disruption of ecosystems. Sustainable tourism practices are essential to mitigate these negative impacts.  

Overall, while tourism can indeed be a valuable accelerator of GDP growth for third-world economies, it should be part of a broader economic development strategy that includes diversification, sustainable practices, and policies to mitigate risks and maximize benefits for local communities. The BRICS (Brazil, Russia, India, China and South Africa) countries have emerged as a potential bloc in the developing countries which caters the major tourists from developed countries. The importance of Inbound Tourism has grown exponentially, because of its growing contribution to the economic growth in the long run. It enhances economic growth by augmenting the foreign exchange reserves, stimulating investments in new infrastructure, human capital and increases competition , promoting industrial development , creates jobs and hence to increase income. Inbound tourism also generates positive externalities and finally, as economy grows, one can argue that growth in GDP could lead to further increase in international tourism. International tourism is considered as a non-standard type of export, as it indicates a source of receipts and consumption in situ.

To sum up, Tourism can spur economic prosperity in third world  countries and for this reason; policymakers should give serious consideration toward encouraging tourism industry or inbound tourism. These countries should focus more on tourism infrastructure, such as, convenient transportation, alluring destinations, suitable tax incentives, viable hostels and proper security arrangements to attract the potential tourists. These countries also need support from all sections of authorities, non-government organizations (NGOs), and private and allied industries, in the endeavour to attain sustainable growth in tourism. Both state and non-state organisations must recognize this growing industry and its positive implication on economy.