Forecasting Short Run Tourism Demand and GDP in the Face of Large Exogenous Shocks: The Case of Mexico and the COVID-19 Pandemic

Abstract

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Mexico is a relevant player in international tourism ranking seventh in tourist arrivals (2019). Mexico’s domestic market, however, accounts for 76.3% of total tourism consumption. Tourism contributes 8.7% of GDP and employs 4.1 million people. The COVID-19 pandemic is having a profound impact on the Mexican tourism industry. The industry must capture the interest of decision-makers in the public sphere to influence policy and attract resources to minimize the pandemic’s effects. To this end, it is imperative to have well-founded estimates of the severe impacts that the sector will suffer in the short run. Given the nature of the present crisis, which has locked down supply and imposed severe mobility restrictions, econometric relationships are of little use in forecasting demand. The approach followed here is based on tapping industry knowledge to estimate total tourism consumption (in a Tourism Satellite Account framework) and complement it with econometric estimates for other variables. Drawing on other sources for the first months of 2020 and on a survey of business executives explicitly designed for this work for June-December, an estimate of tourism consumption, GDP, and employment for Mexico in 2020 is provided. Preliminary figures for June and July suggest the method may prove fruitful, yet further work remains to be done, in particular in the area of non-market related travel.

Keywords: Tourism Policy, Mexicos tourism, COVID-19 assessment, Sustainable Tourism, Forecasting Tourism Demand.

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