KUALA LUMPUR: According to Fitch, the rebound in tourism in Asia Pacific (APAC) is anticipated to continue in 2024, but more slowly because of fewer favourable base effects.
The company predicted that the region’s visiting volume will increase from 65% in 2023 to 92% of the 2019 level.
This year, foreign tourism receipts in nominal US dollars are expected to rise by around 6.0 per cent over the 2019 figure.
“Our baseline assumption is that a full recovery of international tourism arrivals in APAC will materialise in the first half of 2025,” it stated today.
The majority of APAC’s Fitch-rated sovereigns have recovered from the shock to their services balance brought on by the sharp decline in tourism-related income, albeit the rate of recovery varies still amongst them.
The region’s overall economic resilience to global issues, more airline capacity, pent-up demand from important tourist markets, legislative initiatives to restart tourism, and weak local currencies all support the 2H24 tourism revival.
China’s international aviation passenger traffic increased from 40% in 2023 to over 80% of 2019 levels in the first five months of 2024.
One of the key factors boosting visitor arrivals in various APAC destinations, such as Singapore, Vietnam, and Thailand, is the rise in Chinese outbound travel in 2024.
However, Fitch anticipates that Chinese tourists will continue to spend somewhat sparingly due to persistent economic difficulties, particularly in the real estate market.
“We anticipate that the prospects for the tourism industry’s recovery will continue to be dependent on several factors, including a gradual return of air travel, rising energy and flight costs, and increased geopolitical tensions.
“In addition, a global shock or pronounced economic downturn, especially a more substantial weakening of the Chinese economy than our baseline, could weigh on the near-term outlook and postpone a full tourism recovery in the region beyond 1H25.”
Rising sea levels, coastal flooding, extreme weather, and coral bleaching are just a few of the effects of climate change that Fitch said matter to economies that rely more heavily on nature-based tourism.
“Although this is a global phenomenon faced by all tourist destinations, some APAC sovereigns, for example in Southeast Asia, are particularly vulnerable to flooding and will face long-term challenges to protect the natural resources that attract tourists, such as coral reefs.”
Additionally, Fitch anticipates that most APAC sovereigns with a rating of Fitch will have adequate credit buffers to withstand the risks of a severe decline in tourism.
But it sees more risks in frontier markets, and places like Thailand, where tourism is important to the economy and public coffers, have seen a decline in recent years.
Frontier-market sovereigns such as the Maldives, whose external funding and liquidity are deteriorating, are particularly vulnerable to a scenario in which a significant exogenous shock results in lower tourism receipts.
