Moody’s says tourism is at the root of Greece’s resilience to Covid-19

Athens, Syntagma Square. Photo: Visit Greece / Y. Skoulas

Greece’s resistance to Covid-19 shock is the result of a strong tourism industry, according to the credit agency Moody’s, who said the recovery of the sector will boost economic growth and fiscal adjustment in European countries that are heavily dependent on tourism.

According to Moody’s data, tourist arrivals have seen a steeper drop in Cyprus (Ba1, stable outlook), Spain (Baa1, stable outlook), Greece (Ba3, stable perspective), and Malta (A2, negative outlook) due to their heavy reliance on foreign air arrivals.

On the other hand, travel in auto as good as national travel limited the decline to around 50 percent of the European average in Croatia (Ba1, fixed perspective), Portugal (Baa2, fixed perspective) and Italy (Baa3, fixed perspective).

With the exception of Cyprus, these seven countries have also suffered the biggest economic blow in Europe due to restrictions linked to Covid-19, while some saw the biggest increase in debt-to-GDP ratios in 2020.

At the same time, however, Moody’s analysts point out that credit profiles has remained resilient. The agency has modernized Croatia, Greece, Cyprus and Portugal, and confirmed the “stable” rating and outlook for Italy and Spain.

The agency points out, however, that Greece, Portugal, Malta, Spain, Cyprus, Croatia and Italy as well as Iceland and Montenegro have still not emerged from deep waters. They are still the most exposed to the risks affecting Europe, including new viral mutations and reluctance to vaccination which will inevitably lead to further restrictions and measures. According to Moody’s analysts, this may derail the recovery effort and lead to a further rise in already high debt levels.

Watch Greece, Moody’s found the vaccination rate of the adult population and the willingness of Greek citizens to be vaccinated is 73 percent.

As a tourist destination, Greece may be more at risk, especially considering that 88% of those who travel to Greece do so by air; 7% by car; and 9 percent of non-EU residents.

The report also found that tourism businesses in Europe are now not as resilient to shocks, especially after a weak year.

Despite the significant financial support given, the pandemic has eaten away at the liquidity “cushions” of small and medium-sized businesses and this year’s mild recovery should not help them “rebuild” their financial situation, Moody’s said.

The credit agency suggests effective use of stimulus funds so that countries can adapt to changing tourism demand and limit vulnerability due to over-reliance on the industry.


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