Tourism receipts to double as China reopens

MANILA, Philippines — Tourism receipts in the Philippines could double this year, as the sector benefits from the return of Chinese tourists, according to MUFG Bank Ltd of Japan.

Jeff Ng, senior currency analyst at MUFG, said in its ASEAN tourism outlook titled “The Return of Chinese Tourists in 2023,” that travel receipts in the Philippines could hit  anywhere from $6 billion to $8 billion this year compared to the projected $4 billion last year.

The country’s gross travel receipts hit $1.26 billion in the third quarter of last year, 52 percent of the third quarter 2019 levels.

“Given current trends, we anticipate broader upsides in 2023. Gross travel receipts may hit $6 billion to $8 billion in 2023, higher than an expected $4 billion in 2022 and catching up to $9.8 billion in 2019,” Ng said.

Ng explained that Philippine and ASEAN economies have been benefitting from the reduced COVID-19 restrictions over the past year that has led to a partial recovery in the tourism sector.

“Since the recent removal of restrictions in China, we believe that China-ASEAN travel will be the dominant theme in 2023. This comes after intra-ASEAN travel recovery in 2022,” Ng added.

He said the impact would likely be more evident in the second half of this year with the anticipated progressivity for the coming months.

Last October, President Marcos approved the lifting of COVID-19 test requirements for incoming visitors, as well as lifting the mask wearing mandate for indoor settings, effectively ending lockdown protocols.

Visitor arrivals represented only three percent of pre-pandemic or 2019 levels in December 2021, but climbed to 56 percent by December 2022. This was supported by ASEAN tourists at 55 percent of 2019 levels.

Travel from China slightly improved in 2022, but not as rapidly as other regions due to China’s zero-COVID policies. Travel from China improved to 7.2 percent of 2019 levels in end 2022 from 0.9 percent in December 2021.

“The return of Chinese tourists will likely significantly benefit tourism in the Philippines. China was the second largest source of tourist arrivals in 2019 at 1.7 million or 22.2 percent of total. This greatly outweighed the 6.3 percent from intra-ASEAN sources,” Ng said.

MUFG also believes that returning Filipinos will likely provide another source of travel receipts.

For this year, the Philippine Travel Agencies Association is expecting international visitor arrivals to approach pre-pandemic levels of 8.26 million in 2019.

The Department of Tourism (DOT) sees a 78 percent jump in tourist arrivals to at least 4.8 million from 2.7 million last year.

“The positive impact on the Philippines will likely be modest, due to the economy’s primary reliance on domestic private consumption. The improvements from tourism, further boosted by travel from China, will likely benefit all tourism related sectors,” Ng said.

According to Ng, the pace and magnitude of Chinese tourists’ recovery would likely be dependent on the domestic economic recovery.

“Vietnam, Thailand, and the Philippines are set to benefit from China’s reopening in 2023, both from the current account and from economic growth,” Ng said.

The Japanese investment bank said the Philippines could see a fairly balanced net travel receipts balance, after a deficit of around $500 million in 2022.

“The boost from China will likely be significant and outweigh outbound travel out of the country and the subsequent travel payments. This will be a positive shift away from the $7 billion of net deficit in 2019. In terms of the current account, we anticipate modest improvements compared to other major drivers,” Ng said.

MUFG is forecasting a narrower current account deficit of 4.8 percent of gross domestic product (GDP) in 2023 from 5.6 percent in 2022, benefitting the peso.

“The impact on PHP will likely be beneficial, although small. The currency will likely be primary supported by more stable yield differentials with the US, improvements in the current account, and commodity price movements,” Ng said.