How Much Does Tourism Contribute Toward a Country’s Economy?

Young woman traveling in India contemplating ancient temple in Jaipur, India.
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Tourism might not come up first in mind when thinking of the heavy hitters in economic output, but the numbers might surprise you.

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In 2019, before the pandemic, the tourism industry contributed $8.9 trillion to GDP — that meant 10.3% of global GDP came from tourism, including 7% of the world’s total exports.

Money spent by foreigners in a different country can be an important source of foreign exchange, and growing tourism adds crucial jobs to developing nations and their economies.

Although it is difficult to exactly quantify the exact amount tourism contributes to a country’s economy, the Harvard Center for International Development recently conducted a study with Mastercard using transaction data to see how impactful foreign tourist money can be.

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While tourism in the traditional economic sense can be easily quantified using hotel and restaurant invoices, it is difficult to capture tourism income in real data. This means how a country earns foreign exchange from tourists, in other words, money spent in a country that was earned and procured from elsewhere. 

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Research scientists studied spending patterns in 40 countries from 2011 to 2016, including most of Europe, the United States, and select countries in South America and Oceania. These destinations account for over 60% of all tourism in the world.

Across the study, Harvard found that tourism accounts for over 8% of traditional exports plus tourism expenditures, making it comparable to trade in oil and energy and almost equal to trade in agriculture!

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There is, of course, variation amongst nations. In Cyprus, the share of tourism in all exported goods is 52%, Croatia 42%, Iceland 39%, Greece 36% and Luxembourg 22%. Exports are a main indicator, and addition, of a nation’s overall GDP.

The five countries are also all smaller than most of their neighbors. This trend continues in other parts of the world as well, with 30% of Jamaica’s 2.9 million inhabitants relying on tourism as their main form of employment. 

For many of the Caribbean Islands, a whopping 50% or more of their labor force relies on tourism. These include the British Virgin Islands, St. Kitts and Nevis, the Bahamas and the U.S. Virgin Islands amongst more. Some, like St. Lucia, Aruba and Antigua and Barbuda have over 70% of their entire labor force reliant on tourism. 

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Antigua and Barbuda has a whopping 91% of their entire labor force reliant on tourism alone!

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Travel, leisure and hospitality was the largest sector affected by the pandemic, and for countries like Antigua or Aruba whose economies solely rely on tourism, national economies and GDP were heavily affected. Some countries have already begun opening tourist lines with certain restrictions, like vaccine requirements or proof of negative COVID-19 test, but full economic, and tourist, liftoff is still a while in the future.

Of the 20 largest economies in the world, Mexico has the highest share of tourism contributing to its GDP with 15.5%, followed by Spain at 14.3% and Italy with 13%. The United States is 10th on the list, with around 8.6% of its GDP originating in tourism.

Interestingly though, the U.S. tops the list of countries earning the most from the tourism industry in absolute dollar terms. Tourism contributed $1.8 trillion to the U.S. economy in 2019, more than any other nation. 

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Last updated: Oct. 1, 2021 

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 
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