The house warns that tourism activity will be much slower in the second half of the year.
photo: Capital Economics
Around 0.3% was tourism's contribution to eurozone GDP growth in the first half of 2023, Capital Economics estimates, as related spending rose sharply despite high inflation and rising interest rates. The tourist wave was what helped the countries of the European South to over-perform, analysts emphasize. However, with the industry now back to pre-pandemic levels, the investment house warns that the scope for continued recovery is now limited, so tourism activity is forecast to be much slower in the second half of the year.
“The recovery in tourism has helped Southern European economies perform better over the past year,” Capital Economics analysts note, adding that “countries where tourism has the biggest contributor to GDP have generally seen the fastest growth over the last year”.
However, at the same time, the house warns that tourism activity will be much slower in the second half of the year, in seasonally adjusted terms . “The industry has broadly recovered to pre-pandemic levels, which means there is only limited scope for the recovery to continue. In addition, the rise in interest rates will likely result in households reducing consumption and perhaps spending less of their income on travel,” the analysts explain.
In this context, Capital Economics does not expect additional boost to growth from tourism in the second half.
