Study: The Economic Impact of Travel Restrictions on the Canadian Economy due to the COVID-19 Pandemic
Since mid-March, Canada has fully or partially closed its national borders to tourists and non-essential travellers to contain the spread of the COVID-19 virus. Travel across regions within Canada has also been restricted. These travel restrictions have had a major impact on the economy. According to the new study, titled "The Economic Impact of Travel Restrictions on the Canadian Economy due to the COVID-19 Pandemic," the travel restrictions imposed to contain the spread of the virus are estimated to lead to a reduction in Canada's gross domestic product (GDP) in the range of $27.9 billion to $37.1 billion and to the loss of 400,000 to 500,000 jobs in 2020.
Travel restrictions have a direct impact on the tourism industry, but also on the industries that produce inputs used by the tourism industry. The study uses multipliers from Statistics Canada's supply and use tables—a useful tool for economic impact analysis—to estimate both the direct and indirect impacts.
The study also considers several scenarios that assume different timelines for the beginning of the gradual recovery of the tourism industry. While the potential dates for the start of the recovery period are associated with the lifting of domestic and international travel restrictions, the turnaround will also depend on the restoration of travellers' incomes and their trust with regard to health and safety. Among the scenarios considered, one assumes the lifting of domestic travel restrictions in early July and international restrictions in early December, while the most pessimistic assumes the lifting of both domestic and international travel restrictions in early December.
Travel restrictions could significantly damage the tourism industry, which includes transportation, accommodation and food services, travel arrangement and reservation services, and recreation and entertainment. It is estimated that the direct impact of the travel restrictions could result in a GDP loss of $17.6 billion to $23.3 billion and the loss of 306,000 to 406,000 jobs in 2020, between the most optimistic and pessimistic scenarios (charts 1 and 2).
As output in the tourism industry declines, the demand for intermediate products and services provided by other industries, such as wholesale and retail trade, utilities, food manufacturing, and other service industries, also declines. The study estimates that the indirect impact of travel restrictions could lead to a loss in GDP of $10.3 billion to $13.8 billion and to the loss of 107,000 to 143,000 jobs in 2020 (charts 1 and 2).
Compared with 2019, the estimated overall impact amounts to a reduction in Canada's GDP of 1.3% to 1.7%, which accounts for more than 14% of the total decline in GDP as a result of the pandemic, as forecasted by the International Monetary Fund and the Organisation for Economic Co-operation and Development. This proportion is much larger than the tourism industry's share of GDP (about 2% in 2019), which underscores the disproportional adverse impact the pandemic has had on tourism.
These estimates are sensitive to the scenarios assumed and other parameters used in the analysis. Because Canada is still in the middle of reopening, a great deal of uncertainty about the future paths of recovery remains.
The research paper, "The Economic Impact of Travel Restrictions on the Canadian Economy due to the COVID-19 Pandemic," part of the Economic Insights series ( 11-626-X), is now available.
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To enquire about the concepts, methods or data quality of this release, contact Huju Liu (firstname.lastname@example.org), Economic Analysis Division.