FRANCE: Tourism To Decline If Terror Attacks Continue

The terrorist attacks in Paris could lead to a significant decline in tourist numbers, especially in France, while wider market volatility should also be expected, Virginie Maisonneuve has said.

In a blog post for her new company, Maisonneuve Global Advisors, PIMCO’s former head of global equity said the incidents on 12 November could provide a headwind to European growth.

Coming in the wake of terror attacks in Turkey, Beirut and Sinai, Maisonneuve said travellers may create linkages between tourism hot spots and potential future events, which could lead to more people staying at home.

‘If one includes services attached to travel – i.e. hospitality, car rentals, entertainment, transports, meetings and conventions - tourism has been a relative bright spot for the global economy in the last few years,’ she said.

Tourism, as a whole, is a $7.6 trillion industry and accounts for 277 million jobs worldwide, Maisonneuve said. This is set to increase further as the emerging world, most notably China, begins to undertaken more international travel.

‘Looking at Europe, and France in particular, the total contribution to GDP is meaningful – at approximately 9%,’ she said.

‘For France, with approximately 84 million tourists a year, the country is one of the leading destinations in the world and ranks number six globally with regard to total contribution to GDP, at approximately $255 billion in 2014 versus the world’s average of $58 billion.

‘In France, tourism’s total contribution to employment is 2.7 million jobs, or just shy of 10% of employment. The industry also represents close to 7% of total French investment. No need to say that the potential impact of a severe decline in visitors would impact the French economy.’

Maisonneuve said there could be wider implications and expects more volatility to enter the markets. She said, given the timing of the attacks, there is likely to be discussion of a response at G20 conference in Turkey.

‘From an investor standpoint this could mean more direct military involvement in the Middle East as well as increased defense budgets globally, and possibly the need for some fiscal relaxation when compared to the past few years.

‘Politically speaking, it also means more polarization within Europe with extremist parties leveraging the recent events to “build their case”. Soon after the Paris events, Poland and the Czech Republic clearly voiced their heightened disagreement of the European policy with regard to the refugee crisis.

‘Currency markets will also be impacted, as the yen and the US dollar are generally the preferred “safe” currencies in times of increased volatility,’ she added.