No foreign visitors until late 2020, then gradual recovery – Westpac

2nd April 2020 By Staff Reporter | news@tourismticker.com | @tourismticker

It is unlikely New Zealand will see any foreign visitors until the end of 2020, says Westpac.

The bank’s latest economic bulletin from chief economist Dominick Stephens paints a grim picture for tourism.

“The hardest-hit industries will be those involved in tourism and hospitality related activities, including tour operators, car rental firms, restaurants, cafés and bars,” said Westpac.

“We are assuming an almost complete absence of foreign tourism until late this year, and only a gradual recovery beyond that.”

The bank said it expected around 207,000 jobs to be lost, equating to 7% of the workforce, and pushing the measured unemployment rate up to 9%.

“Layoffs and business failures are more likely to occur in industries that feature a high proportion of small firms, such as wholesale and retail, hospitality, rental and leasing, tourism and small manufacturers. Smaller firms are more likely to lack the deep pockets required to tide themselves over during the period of disruption.

“Once the crisis has passed, however, it will be small business that leads the recovery. Cheap money and low barriers to entry will encourage new entrepreneurially driven firms to spring up. Large firms are more likely to survive the downturn but will be less dynamic because they will focus on reducing debt.”

However, many companies would not survive the downturn.

“Many firms will fold during the disrupted period, and it will take time for new entrepreneurs to take their place,” said Westpac.

“Other firms will have borrowed to get through the lockdown, and will enter the post-Covid-19 era with high debt levels. This will make it harder to raise capital and expand. These firms will focus on balance sheet repair for some time, leading to only a gradual recovery in unemployment and business investment.”