THE tourism industry stands to benefit from China’s recovery with mainland nationals now free to travel without restrictions for the first time in three years, Moody’s Analytics said.
In a commentary dated Feb. 21, Moody’s Analytics Chief Economist for Asia-Pacific (APAC) Steven G. Cochrane said high-spending Chinese tourists will boost service industries in the region with the removal of regulatory barriers in China for traveling overseas.
“The Philippines, Thailand and Vietnam have the most to gain if travel from China can rebound to pre-pandemic levels. Their tourism industries depend the most on visitors from China, who made up between 20% and 35% of total tourist arrivals in 2019,” Mr. Cochrane said.
He also said Chinese tourists will likewise visit Malaysia, Indonesia, and Singapore, while Australia and New Zealand will see a return of Chinese university students.
The coronavirus disease 2019 (COVID-19) pandemic negatively affected travel and tourism globally. Three years after lockdowns were implemented, the industry is slowly recovering as travel restrictions ease and COVID-19 cases drop.
According to the Philippine Department of Tourism (DoT), 2.65 million international visitors entered the country last year. Of the total, only 39,627 were Chinese visitors.
The DoT is targeting 4.8 million international visitors this year, still well below the 8.26 million international arrivals posted in 2019, the last full year before the pandemic.
Aside from tourism, China’s recovery will also affect trade and inflation across the region.
“China’s manufacturing rebound will be driven by improved domestic demand this year. While not as potent as its more powerful export engine, it will create demand for goods from the APAC region,” Mr. Cochrane said.
Rising demand in China will also help jack up inflation there. Chinese inflation rose to 2.1% in January. But inflation risk “is higher in… Southeast Asia, particularly in the Philippines and Vietnam, where food prices are still rising and energy subsidies are being scaled back,” Mr. Cochrane said.
“Central banks, excluding China and Japan, are still expected to end their tightening cycles this quarter and to hold rates steady through this year,” he said.
In the Philippines, inflation accelerated to a 14-year high of 8.7% in January from 8.1% in December. This marked the 10th straight month that inflation exceeded the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target.
To curb inflation, the BSP raised its benchmark interest rate by 50 basis points to its highest level in nearly 16 years. The bank has signaled more tightening at its coming meetings.
“Higher-than-expected inflation could slow the pace of growth in the region, and if regulators choose to raise policy interest rates later in the year, it would put additional brakes on economic growth,” Mr. Cochrane added.
Due to rising interest rates and elevated inflation, the Philippines projects gross domestic product growth to slow to 6-7% this year from the 7.6% posted in 2022.
“The APAC economy will accelerate as the year progresses. China will have the strongest acceleration as it transitions from the era of the zero-COVID (coronavirus disease) policy that created deep uncertainty over most of 2022,” Mr. Cochrane said.
“The greatest risk to this optimistic outlook is that US and European economies falter and fall back into recession, delaying the improvement in demand for imported goods and services,” he said, adding that the risk of recession in both countries is “uncomfortably high.”
The war in Ukraine could also reignite inflation and derail the outlook for accelerating economic growth in the second half of 2023 and into 2024, he added.
Moody’s Analytics projects the Philippine growth at 7.1% this year, before easing to 5.8% in 2024. — Keisha B. Ta-asan