EXAMINING THE IMPACT OF COVID-19 PANDEMIC ON TOURISM SECTOR USING INPUT-OUTPUT ANALYSIS: THE CASE OF CROATIA

Abstract

Purpose – The purpose of the study is to determine the impact of COVID-19 pandemic on tourism and other economic sectors included in the tourism value chain in Croatia. The evaluation of total effects is important in order to evaluate effectiveness of policy measures introduced by Croatian government. Methodology – The estimation of COVID -19 effects on Croatian economy is based on standard input-output model. The open I-O model quantifies indirect effects generated in the tourism value added chain. Closed I-O model estimates induced effects related to the decrease in the net disposable income of the employees which participated in the tourism sector production chain. Findings – Strong reduction in international tourism caused by COVID -19 resulted in significant decrease in activity of many other industries. Besides hotels and restaurant, the most affected sectors were transport, trade, food industry, sports and entertainment services. Total value of indirect and induced tourism effects is bigger than value of direct effects in terms of employment and value added because of multiplier effect. Government subsidies in the form of income support for companies which retained employees have only short-term and limited effects. Negative COVID -19 effects were partially mitigated by output rise in other domestic sectors. GDP decline was more pronounced than GVA since indirect taxes, notably VAT and excise duties were particularly sensitive to negative trends in tourism activity. Contribution – The methodology applied provides the reliable analytical background for analyses of impact of negative exogenous shock affecting tourism and total Croatian economy and assessment of government policy response effectiveness