How can tourism affect the economy?

Throughout the world, we can see many countries relying on tourism for a big part of their annual revenue. Most middle and low income countries with beautiful landscapes and exotic ecosystems are also investing a lot in facilities in order to stimulate tourism. An outside observer could be perplexed on how the movement of persons could affect the economy of a whole nation. If you’re part of this group, this article may help you.

Tourism is a good way to increase the GDP

To evaluate the health of an economy, economists use the Gross Domestic Product. It means the total value of all goods and services produced in a country in a given year. And tourism has a fantastic effect on the GDP of the host country. When tourists arrive in an area, they spend money to experience things, for their leisure and sometimes for business motives. All the spending done favors the growth of the GDP because it occurs within the border of the host country. The occurring of activities related to tourism allows the government to have a continual source of income with taxation. As a result, one could easily notice an increase in the wealth of the country.

Tourism has a spillover effects in the economy

This is part of the indirect effects of tourism in the local economy. In an area where touristic activities occur, apart from the directly related to tourism, there are a lot of opportunities created in many other sectors. Indirectly, the agricultural sector, the health sector, the communication sector and even the educational sector are positively impacted. Tourism is also good for the economy because it supports the for foreign exchange reserves. In fact, tourists use to spend their money in foreign currencies. The earning of foreign currencies is a good way to stabilize the balance of payment, but also to higher the value of local currency.