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There’s Hope Yet for the EU Country Most Reliant on Tourism

Braced for a knockout blow from Covid-19’s effect on travel, Croatia may yet get a reprieve.

There’s Hope Yet for the EU Country Most Reliant on Tourism
Souvenir ceramics sit for sale in a tourist store in Korkula, Croatia. (Photographer: Paula Bronstein/Bloomberg)

Braced for a knockout blow from Covid-19’s effect on travel, the European Union’s nation most reliant on tourism may yet get a reprieve.

Croatia, which recorded a 96% dive in foreign visitors in May from a year earlier, revealed another similarly shocking number for June on Wednesday, showing a 72.7% drop. But things have picked up since. The head of the tourist association says 2020 data through August show arrivals are at almost half of last year’s level, much better than expected.

The scale of the improvement into the summer’s busiest months will determine how the economy rebounds from its worst recession since communism.

There’s Hope Yet for the EU Country Most Reliant on Tourism

“There’s nothing that can compensate for the income from tourism for Croatia in the near future. Nothing,” said Zeljko Lovrincevic, a researcher at the Economic Institute in Zagreb. “There have been warnings for many years on how this is a fragile industry, and now the devil’s at the door.”

There’s Hope Yet for the EU Country Most Reliant on Tourism

Tourism revenue accounts for about 20% of the economy, according to Croatian official statistics. That’s higher than any other EU nation as measured by the Organization for Economic Cooperation and Development, which uses different methodology and doesn’t have up-to-date figures for Croatia.

The industry has helped the country recover from the bloody wars that scarred the Balkan region in the mid-1990s and again after the global financial crisis a decade later. Almost 20 million people visited the nation of 4.1 million last year. But the influx of tourist cash has also made Croatia more reliant on the industry, just as it’s preparing to adopt the euro as early as in 2023.

Tax receipts have confirmed the tourist association’s optimism about a rebound since the end of June. Revenue for the industry for the week ending Aug. 8 was 74% of the same period last year, according to Tax Office data.

Even taking into account the recent uptick, the dearth of travelers is denting tax revenue and stoking bankruptcy fears for tourism-dependent businesses. The traditional season has been extended deep into October to help an economy that’s seen shrinking 10.8% this year. That plan could yet be scuppered by a second wave of infections.

Dubrovnik, the medieval port city that gets four-fifths of its revenue from tourism, is looking for loans and EU help to stop people losing everything. Its predicament is prompting self-reflection.

“We need to rethink everything,” Mayor Mato Frankovic said in an interview last month. “Relying only on bookings isn’t going to work anymore. We need a sustainable lifestyle.”

©2020 Bloomberg L.P.