October 19, 2020: Fitch Ratings in its recent report titled ‘Coronavirus Impact on Tourism’ has stated that the coronavirus pandemic continues to disrupt international services trade, especially tourism. International tourist arrivals globally declined by 65% YoY in 1H20, and APAC by 72% YoY, according to the World Tourism Organization.
Fitch Ratings expects international tourism flows in APAC to remain subdued through much of 2021 as cross-border travel restrictions are lifted slowly, and as uncertainty lingers around the evolution of the pandemic and the availability of effective vaccines and treatments.
As per the report, the inbound tourism receipts account directly for at least 5% of GDP for more than a third of Fitch-rated APAC sovereigns, led by Macao and the Maldives, followed by Thailand and Hong Kong. All four of these economies are experiencing large economic contraction s in 2020, led by Macao and the Maldives where we project GDP declines of at least 40% and 16%, respectively. We project Thailand’s economy to contract by 7.8% in 2020 and Hong Kong by 7.5%. Other Fitch-rated sovereigns in APAC are certainly not impervious from the hit to tourism, especially in economies where the sector has expanded rapidly in recent years, such as Vietnam and Sri Lanka.
Governments that have succeeded in curbing COVID-19 have begun to cautiously ease domestic lockdowns and border controls since late 2Q20. Mainland China and Macao started to resume bilateral travel in July, and the former has introduced “travel bubbles” with Korea and Singapore for qualified business travelers. Arrangements for travel bubbles between Australia-New Zealand and between Singapore-Hong Kong have advanced and will be launched soon. However, the recent surge in new cases will impede the borders reopening and a speedy resumption of cross-border travel.
Sovereigns with high reliance on fiscal revenue from the tourism and related sectors but with fiscal headroom for countercyclical stimulus, and sufficient external buffers, are better placed. Macao and Hong Kong, for example, have strong public and external finances, built up in the years prior to the outbreak. Elsewhere, demand for travel is being diverted domestically, as hotel occupancy rates bottom out despite border closures. A faster domestic tourism recovery will offset revenue loss due to falling inbound tourists, but only partially.
The resumption of travel visas to Macao for visitors from mainland China, is paving the way for a slow return of short-distance gaming tourism to the territory, which should extend into 1H21. In contrast, a full recovery of long-distance inbound travelers to the Maldives will take longer to materialize, which is weighing on its ratings from external liquidity pressure and challenges in financing the fiscal deficit.
Fitch Ratings
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