Minister of foreign trade predicts severe struggles for tourism sector

Kaimar Karu Source: Siim Lõvi /ERR

The present difficult situation in tourism will likely not end this year and is expected to continue in 2021, Estonian Minister of Foreign Trade and IT Kaimar Karu said in a live broadcast with daily newspaper Postimees on Thursday.

Karu said, however, that the relief measures laid down in the supplementary budget will go a long way for entrepreneurs.

"Tourism and micro enterprises were granted separate funds in the supplementary budget. Other sector were not. Should the sum have been bigger? It could always be bigger, but what matters is that separate amounts were allocated and actual direct support was made available in addition to loan guarantees. We will try to distribute this sum between entrepreneurs as reasonably and swiftly as possible," he said.

The minister agreed that support in his area of responsibility could have been larger.

"With regard to direct support - that is money paid directly to entrepreneurs without a repayment obligation - these €25 million to the tourism sector and €10 to micro enterprises are, of course, relatively small sums. That is also why the Ministry of Economic Affairs and Communications have additionally drawn up a package for the tourism sector consisting of measures of both Kredex and Enterprise Estonia, and not just the latter," Karu said.

Tourism enterprises will be able to take out a loan under favorable conditions with the help of Kredex when the measures have been approved by the European Commission and the government of Estonia.

"We have been working for Kredex to be able to provide a 100-percent guarantee by the state to entrepreneurs, which should drive down banks' interest rates. Businesses will be applying for a loan through banks, and the bank can ask for Kredex' guarantee, if needed. If Kredex' guarantees secure [bank loans] 100 percent, banks' risks will be notably lower and they can offer lower interest rates to entrepreneurs," he said.

Karu noted that whether or not a second supplementary budget is needed will be determined during the upcoming summer months.

"The next few weeks will show how big the demand for support is and then we can provide input for a potential second supplementary budget accordingly," he said. 

The effects of tourism on Estonia's economy should not be underestimated.

"The further-reaching impact of the tourism sector amounts to eight percent of Estonia's GDP. Many other sectors are also linked to tourism, such as small farmers and merchants who sell their goods to restaurants. The effects of tourism on the budget are much more extensive. The impact also differs from one region to the other; Ida-Viru County and the islands, for instance, are in a more difficult position than other regions, which is why there is a separate line for them [in the supplementary budget]," he said.

The broader impact of the crisis in tourism will make itself known with a time lag.

"If we take a step back and look at the enterprises that have been affected and not just those whose revenue has decreased to zero, we are talking about the majority of Estonian businesses. The impact will become apparent in different sectors with a delay," the minister said.

Karu added that entrepreneurs must use the time now for drawing up new business plans.

"Recovery will not be swift. It is possible that businesses in the tourism sector will need to reprofile themselves as demand for their goods and services will simply fall," he said. "What we have regarded as self-evident is no longer self-evident. Even when borders are reopened, flying may not prove possible for a while."

The minister said that there will likely be a new normality in the tourism sector.

"When the situation begins to normalize, there are two things that are likely to happen. Firstly, the proportion of domestic tourism will increase. Secondly, the states in our vicinity will be significantly more important partners to us after borders have reopened," Karu said, adding that the number of tourists from countries that are further away from Estonia will decline significantly.

"People are plagued by financial troubles globally. We will not be seeing a similar number of Asian tourists to the ones we had in recent years any time soon," he said.


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Editor: Helen Wright

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