Terrorism’s Economic Impact on French Tourism

When terrorism on the scale of the Nice attack happens, it is not possible to calculate some of the harms.  The loss of life, the damaged sense of security and the uncertainty of the future are all harms that lie outside of anyone’s ability to quantify.

But for the local business owners – the restaurateurs and shopkeepers who see their bottoms lines hit (and in some cases hollowed out) by terrorist activity and the fear of the outside world that tends to accompany it – the economics of the situation are grim.

“There will surely be an impact,” noted specialty food store owner Thomas Benillouz told Bloomberg on his falling deliveries this summer. “I think that people will either cut their stays short, or cancel their trips. It makes sense, given what happened.”

Economists, until recently, did not agree with Benillouz – noting that previous mass terror attacks (think 9-11 in New York or the Charle Hebdo shooting a year ago) did not have any long-term effect on local consumer activity.

But those assumptions are based on the idea of terror attacks – though horrible – essentially being one-offs. France has had three major mass killings in less than two years – meaning one-off is less and less an applicable concept – which means the search for broader economic effects is on.

“The repetition of events may have consequences not seen in the past,” said Philippe Waechter, chief economist at Natixis Asset Management in Paris. “The impact on the image of France will probably be the determining factor.”

France draws 84 million travelers a year – tourists generate some 7 percent of the nation’s economic activity.  But this year, merchants like Benillouz are seeing flat summer travel.

“There were a lot of people who said to themselves, ‘Let’s not go there, it’s going to be crazy,”’ the specialty shop owner said.

The official data matches the perception – foreign visitors to France fell 8.7 percent in the fourth quarter, and was still down 2.7 percent in the first three months of 2016, according to Insee, France’s national statistics office.


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