An assessment of the structure of tourism in the Maltese economy : a TSA and input-output approach

Abstract

This study represents an analysis of the tourism industry within the Maltese economy and estimates its contribution generated via direct, indirect and induced effects. This analysis is done by aggregating a hypothetical tourism industry within the Input-Output table for the Maltese economy for the reference year of 2010, based on data published in the Tourism Satellite Accounts (TSA) also for the reference year of 2010. These two sets of data are both published by the National Statistics Office of Malta (NSO). This study aims to augment the Input-Output table for tourism and thus be able to estimate and evaluate a set of output and value-added multipliers. These will enable the analysis of what would be the impact on overall output of an exogenous shock to final demand of the tourism sector, to estimate the contribution of the tourism sector to the Maltese economy and to analyse the input and output structure of the tourism sector. This is done based on the Leontief Demand Driven Model. An open Leontief Demand Driven Model is used to derive simple multipliers while a closed Leontief Demand Driven Model is used to derive total multipliers. The derived multipliers are compared in terms of their direct, indirect and induced effects. The tourism sector is found to contribute 13.1% of total gross value added (GVA), 5.7% of which is generated through direct effects (Sacco, 2016), 3.8% generated through indirect effects and 3.6% through induced effects. Simple and Total Output Multipliers were calculated to be 1.5 and 2.0 respectively. Simple and Total GVA Multipliers were calculated to be 0.5 and 0.7 respectively. With the Coronavirus pandemic (Appendix F) that is going on at present, tourism for the year 2020 will face a significant decline. A substantial decline of 80% in tourism final demand will decrease overall output by 8%. Tourism is important for the Maltese economy however, as of yet, there is no NACE for the tourism industry specifically. Thus, the approach of integrating TSA and the Input-Output table will enable the separation of the tourism from the other sectors and aggregated as an industry. This approach is a novel approach for Malta and therefore it provides and extension to existing literature while being subject to assumptions.