Statistics Canada assesses economic effects of travel restrictions

Published on: Nov 03, 2020 | Tags: Canada Travel Restrictions, COVID-19

International border closures and internal travel restrictions resulting from the global COVID-19 pandemic have had a significant impact on Canada's economy, according to a new study released by Statistics Canada. Although these restrictions are designed to protect public health, they do have a cost in the form of reduced economic activity, especially in travel and related sectors. Canada's central statistics office concluded that travel restrictions could lead to an overall loss in gross domestic product (GDP) of up to $37.1 billion, with more than 500,000 job losses. These losses are divided between different aspects of the travel economy and represent the severe impact of restrictions on this sector, even compared to other areas of the economy.

Direct economic impacts of Canada COVID-19 travel restrictions

The most obvious impact of Canada's travel restrictions, which have now been in place since March, is on the areas of the economy directly involved in travel and tourism. Hotels, restaurants, travel operators, entertainment venues and similar businesses that rely on travellers and tourists have suffered severely under the effects of travel restrictions. Statistics Canada estimates that the loss to GDP in this sector could be between $17.6 billion and $23.3 billion, with the accompanying loss of up to 406,000 jobs. Even the best-case scenario envisioned by the report involves the loss of over 300,000 jobs. These are significant losses in a sector that employed just over 750,000 people in 2019.

Indirect effects of Canada travel restrictions

Any loss in one sector of the economy will naturally have an impact on other sectors, and the damage to the travel and tourism sector in 2020 is no exception. Losses in this sector have important secondary effects in areas of the economy such as food production, vehicle sales, utilities, and many more. Statistics Canada projects that the indirect damage to these industries could result in GDP loss of between $10.3 billion and $13.8 billion. Job losses in these associated sectors could range from an additional 107,000 to 143,000 jobs.

Disproportionate impacts

One way to understand the impact of travel restrictions on the travel and tourism sector is to look at the losses it could sustain relative to its share of Canada's economy. Statistics Canada estimates that the total loss to GDP resulting from these sectors will amount to approximately 1.3% to 1.7% of GDP. The overall decline in Canadian GDP is forecast to be between 8% and 9.4% This means that travel and tourism -- and its associated sectors -- could amount to around 14% of the overall loss to Canada's GDP. This is far out of proportion to its normal contribution to GDP, which was around 2% in 2019. Although many areas of the economy have been hurt by COVID-19, the effects appear to be disproportionately severe in the travel sector.

Future economic projections of the COVID-19 travel restrictions imposed by Canada

In a constantly-developing situation, statistical analysis can sometimes lag behind changing (or unchanging) events. As a result, these figures are estimates based on statistical information available earlier in the year combined with a number of different scenarios for how travel restrictions change throughout the year. Whether the best-case or worst-case scenario, or somewhere in between, applies depends on the future of Canadian travel policy. Although many internal travel restrictions have been lifted, international travel rules appear to be closed to the worst-case scenario than to the best-case at present, suggesting that the economic damage may be closer to the higher estimates than the lower ones. Even with travel restrictions lifted in Canada, restrictions in other countries, as well as reluctance to travel, will continue to reduce the number of travellers to Canada, with corresponding long-lasting impacts on the sector. More study will be needed to determine the exact effect of the pandemic on travel and tourism.

Outlook for the travel and tourism sector

Whichever of the report's projected scenarios come to pass, the inescapable conclusion is that the COVID-19 pandemic will make a significant impact on Canada's travel and tourism industries for a long time to come; with significant job losses and a highly disproportionate loss of GDP contribution, the evidence shows that this will be one of the hardest-hit areas of the Canadian economy. Both businesses and government will have to respond to the fact that it may be some time before travel and tourism return to their pre-COVID levels.