The United Arab Emirates Ministry of Health has announced a diagnosis of a coronavirus case in a family from Wuhan in China – the first such publicly announced case in the Middle East. Of Dubai's 16.7mn visitors in 2019, c6% came from China and 12% from north and south-east Asia overall. Dubai airport is the world's busiest for international passengers with c90mn annually. Tourism directly contributes just under 5% of UAE GDP (likely significantly more of Dubai GDP). Tourism is a significant economic contributor across all of the regional economies, including Saudi Arabia.
Global deaths related to the virus have exceeded 130, confirmed cases in China have exceeded 6,000, and confirmed cases outside China are about 60 (according to data, at the time of writing, from WHO, CDC, NHC, Dingxiangyuan John Hopkins CSSE).
Many of the markets in our coverage are in economies where tourism contributes over 3% of GDP (including China, India, and South Africa in large EM). The following have over a 5% contribution:
- Africa: Egypt, Mauritius, Morocco, Tunisia
- Asia: Maldives, Philippines, Sri Lanka, Vietnam
- Europe-Former CIS: Croatia, Georgia, Iceland
- LatAm-Caribbean: Barbados, Costa Rica, Jamaica, Mexico, Panama
- Middle East: Jordan, Lebanon
Below we illustrate the exposure of economies across the emerging and frontier markets to tourism.
Clearly, the coronavirus is not geographically isolated and global tourism volumes are at risk, at least in the short-term, but the pattern of previous pandemics (or terror attacks) is that tourist traffic has rebounded from any such weakness relatively quickly.
Overall, we consider the Wuhan coronavirus in the same context as other almost-quantifiable global risks in the worst-case scenario (e.g. the potential for multi-state wars around India, Iran, Libya, North Korea, or the South China Sea, the longer-term impact from trade and migration barriers, or the rising sovereign indebtedness). They are all potentially extremely disruptive, but investors are unlikely to price them in precisely because, in a worst-case scenario, they are so quantifiable (to the degree that investment analysis may be the least of anyone's concerns) and, in the shorter-term, the availability of central bank liquidity makes the downside of being too early to price these risks in far too painful.