International travel and tourism has been one of the most dynamic sectors of the global economy in recent years, according to the new report launched from Scotia Economics.

International tourist arrivals increased a solid 6% last year, the strongest annual rise since 2004, to a record of almost 900 million.

“International travel receipts represent just a fraction of the more than US$13 trillion in worldwide merchandise exports,” says Adrienne Warren, senior economist, Bank of Nova Scotia. “The industry is nonetheless an important contributor to output growth and employment for many nations. In Canada, for example, tourism spending, including domestic travel, accounts for 4.6% of gross domestic product and more than 650,000 jobs.

“Tourism remains a high growth industry,” adds Warren, “with international tourist arrivals rising over 40% since the beginning of the decade, or an average of 4.4% annually. Average growth in international travel receipts (in U.S. dollar terms) has been even stronger at almost 8% over this period.”

The fastest growing travel and tourism regions are, for the most part, in emerging or non-traditional markets, including the Middle East, Asia and Africa. Latin America and the Caribbean have lagged, with strong gains in many Central and South American nations tempered by weak demand in the more mature destinations of the Caribbean and Mexico. The latter markets have been most affected by the sharp decline in the U.S. dollar over the past six years, the subsequent softening in U.S. travel abroad, and, more recently, stricter U.S. border entry requirements.

“Growth in international tourism to the developed economies of North America and Europe remains relatively modest,” says Warren. “These mature travel markets are still by far the globe’s largest destination regions, but together accounted for just under 62% of international arrivals last year, down from over 69% at the start of the decade.”

According to Warren, the slowdown in global economic activity will likely lead to greater belt-tightening by both households and businesses as income and profit growth slow. Heightened financial market volatility and tighter credit availability in the wake of the U.S. sub-prime mortgage crisis add another restraining factor. However, Scotiabank economists still expect positive growth overall for the industry in 2008-09, with developing nations continuing to outperform.