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Foreign tourism shutdown supports Russia's struggling economy amid COVID-19

Elena Fabrichnaya

Reuters

Moscow, Russia  /  Sat, October 24, 2020  /  09:01 am
Foreign tourism shutdown supports Russia's struggling economy amid COVID-19

People walk in the Red Square in Moscow, Russia, on October 12, 2020. (REUTERS/Maxim Shemetov)

Russia's economy could benefit by up to $30 billion this year from Russians spending their rubles at home rather than on foreign holidays due to travel restrictions linked to the COVID-19 pandemic, economists say.

The estimates are a rare piece of good news for an economy battered by low global oil prices as well as coronavirus lockdowns. Russia ran a budget deficit of around $23 billion in the first nine months of this year.

Like many other countries, Russia also saw foreign tourists stay away in droves in 2020. But it sent far fewer travelers overseas than usual after closing its borders in March. The outflow in some cases fell by as much as 80%.

Assuming that current travel restrictions remain in place, Russia will have saved an estimated $30 billion in 2020 from the shutdown of overseas tourism, said Sofya Donets, chief economist at Renaissance Capital.

"The delicate question is what did consumers spend this unspent travel money on," she added. "But in any case, fewer imports mean a stronger ruble."

Dmitry Dolgin, chief economist for Russia at ING, put the savings at $37 billion, but also said a drop in foreign visitors had cost Russia $17 billion in lost income, leading to a maximum net positive impact from the border closures of $20 billion.

Many Russians might have chosen to save rather than travel domestically, Dolgin added.

Staycations

Marina Lisitsina, chief accountant at a small construction company, said she had set aside 100,000 rubles (around $1,300) for an all-inclusive trip to Turkey with her child in the summer, but ended up spending the money on home improvements and her summer holiday sunbathing at her dacha country home.

"This is our first summer without the sea, but health is more valuable. Common sense must overcome these desires," she said.

Just 440,000 Russians visited Turkey in August, a top holiday destination before the pandemic, or almost 60 percent fewer than a year earlier, according to Turkey's culture and tourism ministry. For July and August, the drop was almost 80 percent.

Currency outflows attributed to travel fell 89 percent, part of a 52 percent third-quarter drop in services imports year-on-year, the central bank said last week. Any recovery will be slow due to continued curbs on foreign travel, it added.

Russia has resumed flights with some countries, including Turkey and Britain, but these routes have only been officially open since August.

The pandemic's hit to incomes could further depress spending, while fears of job losses and further lockdown measures have increased Russians' propensity to save, said Vladimir Tikhomirov, chief economist at BCS Global Markets.

"In the end, the effect of saving on tourism is likely not to be so significant," he added.

Russia's economy contracted 8 percent in the second quarter, but is expected to shrink by around 4 percent overall this year.

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