Inbound tourism, consumer confidence and geopolitics

With the latest inbound tourism published by NSO for August 2024, we can see that the number of inbound tourists for January to August 2024 where 21% higher than for the same period in 2023 and 29% higher than the same period in 2019.  This means that we will very likely hit a total of around 3.6 million inbound tourists by end 2024. We had achieved just over 3 million inbound tourists by end 2023.

The trend of increasing tourist numbers and a reducing average real expenditure per tourist has persisted as can be seen below. Comparing the average real expenditure per tourist in 2024 (when adjusted for inflation to 2019 levels) to the same average real expenditure in 2019, shows a 4% decline in the average real expenditure per tourist.

The latest central Bank Economic Update outlined that Consumer confidence stood more negative in August 2024 compared to July 2024. It averaged -8.3, down from -6.3 in July 2024, however remaining above its long-term average of -10.2. The more negative sentiment in August 2024 reflected a deterioration across all sub-components of the indicator, with a more negative sentiment from consumers with regards their financial situation in the past 12 months and in the next 12 months, a more negative sentiment with regards the economic situation in the next 12 months and a more negative sentiment with regards major purchases in the next 12 months. The negative sentiment for the economic situation in the next 12 months registered in August 2024, was the most negative ever for 2024.

As I write this article, I am reminded that a year has passed since the barbaric attack perpetuated by Hamas. Since then, we had a war in Gaza that has left millions displaced and some 45,000 dead. As the editorial team of the Fiinancial Times has put it “Twelve months of conflict have left Israel no more secure, its people still traumatised, and the region around it in pain and in flames. Israel’s allies have long understood that the path to lasting security for the Jewish state involves a peaceful settlement with the Palestinians, rather than a forever war. Sadly, Israel, under Netanyahu, has lost faith in the promise of coexistence and in the counsel of its friends.”  We now have to see if the escalating war in the region will affect oil prices even further, which would put the whole world in another inflationary cycle just as it was coming out from the previous one triggered by the Russia – Ukraine War.

This means that our efforts to continue building a resilient economy that can withstand multiple shocks is today more relevant than ever before. We need to achieve growth through higher productivity, a reduced dependency on internal consumption, and more diversified export activity as tourism is very vulnerable to both geopolitical tensions and climate change.