A sideways look at economics

We are living in unprecedented times, ones that we will be telling our grandchildren about in years to come. In an effort to stem the spread of the devastating COVID-19 around the world, our leisure time has temporarily, but considerably changed. There are no more marathon training long runs, no more all-nighters at the pub, no more Premier League Super Sundays to watch (so yes, you actually have to talk to your partner on a Sunday), and the brakes have been put on the global travel network. Although essential to control the spread of the virus, the subsequent changes in both work and leisure patterns are putting economies under stress across the globe, as we set out in our Global Economic and Markets Outlook for 2020 Q1, which we are currently presenting to clients. Meanwhile, in this Friday blog post, we will focus on those countries most vulnerable to the changes in global tourism.

I’m one of the lucky ones, I managed to get my travel and sun fix in Barbados just before the global pandemic really started to take hold of the world. Smug? A little bit. At the time, there were no COVID-19 cases in Barbados, just sun and a little bit too much rum. However, that situation has drastically changed. Regardless of the number of cases in each destination, flights are grounded across the globe. For a small country like Barbados with a population of only 286,000, this is of great concern as they are very heavily dependent on tourism as a source of income. They are also not the only nation with these concerns, with many other countries seeing their livelihoods under threat.

One country particularly badly affected is Macau, Asia’s answer to Las Vegas. It’s a place of fun and fortune, but even they have run out of luck. In terms of the contribution tourism makes to GDP, relative to the rest of the world they are the most exposed to a hit from plunging tourism, over 10 percentage points more than the second most vulnerable. With their tourism base being overwhelmingly Chinese (just under 75% of total visitors in January 2020), they were one of the first nations to feel the economic hit of the COVID-19 outbreak. Visitors from mainland China dried up, dropping 97% year-on-year in February.

Even if they had wanted to, visitors to Macau were stopped from going ‘all in’ at the gambling hub of Asia, as the government opted to close casinos for 15 days in order to stem the spread of the virus. Although they have since reopened, revenues from casinos in the region, one of the main attractions in Macau, have taken a massive hit, nosediving by an incredible 88% year-on-year. This is an early indicator of what could be to come for many companies and industries around the world. In a time of uncertainty, what is for certain is that Macau’s casinos will not be the only casualties.

These are difficult times that we all must navigate. At Fathom Consulting we will continue our rigorous, independent research into global economics, geopolitics and financial markets to give our clients the knowledge and tools needed to make intelligently informed decisions. In addition, our new daily Recession Watch is freely available. You’ll also find timely updates on new charts and stories through our twitter handle, @fathommacro.