Investigation of the Relationship Between Tourism and Economic Growth: The Case of the Baltic States

As economic growth is an aspiration of many developed and developing economies and tourism is claimed to be one of the driving forces for the economy, when COVID-19 hit the world and dropped down the indicators of tourism and economy, it led to looking for solutions to revive the economy and to drive economic growth. This study covers the problem raising from the pandemic crisis affected tourism sector and caused economic downturn with the aim to evaluate the relationship between tourism and economic growth to find out if the support of the Baltic States’ tourism may contribute to economic growth and whether it may be a possible tool to revive the economy that has declined by the crisis as the COVID-19 pandemic. Besides a plenty of research investigating tourism and economic growth, this study is carried out to fill the research gap of the relationship between these two factors in the Baltic States. Performing correlation analysis, data of three Baltic countries – Lithuania, Latvia and Estonia – from the period 2009-2018 are integrated. Tourism is expressed by expenditure while economic growth is measured by GDP and employment rates. The results reveal statistically significant relationship between tourism and economic growth in Lithuania and in Estonia. In Latvia, no statistically significant results were found. As in Lithuania and Estonia tourism and economy has a strong positive relationship, tourism here could be considered as a possible tool to stimulate the economic growth. This analysis may be a useful base for the Baltic States’ political and economic macro-level decision making as it may help to find the possible direction to revive economy while supporting tourism and to go towards the economic growth.