Capital Economics foresees steady tourism growth, a cornerstone of Southern Europe’s economies. The independent economic research business based in London appears reassuring regarding the effects of climate change on tourist activity. In its report, the firm says Greek tourism will probably boost the country’s GDP even more as it accounts for an even greater proportion of those economies.
“Robust growth in the tourism sector supports our view that the ‘peripheral’ economies will generally record strong growth over the coming years. Tourism is likely to add significantly to the southern economies’ GDP even if tourist numbers only increase in line with historical trends. For instance, the World Tourism and Travel Council estimated that tourism directly and indirectly accounted for about 14% of the Spanish economy in 2023. (See Chart 5.) Using that number and assuming that the number of tourists grows in line with its average between 2015 and 2019 (3.3% y/y), tourism might add around 0.5%-pts per year to the Spanish economy, notes the analysis by Capital Economics.
Capital Economics continues in its analysis by projecting GDP growth in Greece, Spain, and Portugal will significantly outperform France and Germany over the coming years, with Greek tourism contributing significantly to this. “One southern economy that we do not expect to outperform is Italy, despite its fairly large tourist sector. This is because tourism accounts for a lower share of GDP in Italy than in other peripheral countries and we expect a substantial drag on its construction sector from the withdrawal of tax incentives.”
Capital Economics does not express significant concern about the impact of climate change on tourism flows, despite acknowledging local protests against tourism in popular cities as well as the passing of local legislation aimed at curbing the number of flat rentals for tourists in some Spanish regions. However, it adds that this will have little impact on tourist numbers at an aggregate level as demand will create its supply.
