The global economy will not be able to overcome the coronavirus outbreak’s hit to tourism and stave off recession, former Nasdaq CEO Bob Greifeld said Tuesday.
“When you look at the real world, $8.8 trillion of the world’s global economy is tied to tourism — about 10%,” Greifeld said on CNBC’s “Squawk Alley.” “There’s no way that number holds up. So it’s impossible to believe that we do not go into a real recession. That will happen.”
Greifeld, now chairman of high-frequency trading firm Virtu Financial, estimated that the virus would wipe out about $4 trillion from the tourism industry. Fiscal stimulus by governments could help the industry but not keep it running at full speed, he said, leading to a big hit for the world economy.
“We never had this situation where you had tourism being such a large part of the global economy. That did not exist in years past. Tourism has increased greater than GDP growth for the past 10 years,” Greifeld said.
Former Wells Fargo CEO Dick Kovacevich said later on “Squawk Alley” that he wasn’t certain that there would be a recession and thought that the fall-off in tourism wouldn’t be as impactful as Greifeld expected.
“I think there will be a substitute for people doing other things. Maybe not using an airplane but using their car and so on. I don’t think that money is going to go all in to savings accounts,” Kovacevich said. “What I’m really more concerned about is what happens to the jobs market if tourism shuts down.”
Shares of major airlines and cruise companies have cratered since the coronavirus outbreak as countries around the world have implemented travel restrictions to try to prevent the spread of the virus. Falling travel demand has already led major airlines to slash flights from their upcoming schedule and offer customers more flexibility in scheduling flights.
Greifeld expects that once consumer confidence rebounds any recession recovery would be mostly “V-shaped,” suggesting a quick slide down but a quick bounce back up.
“There will be a lag factor. People will have to have data that says this thing is under control … and then they’ll evolve into normal behavior. But that can happen in a relatively safe period of time,” he explained.