Pandemic shrinks tourism's contribution to economy in 2020

MANILA, Philippines (Update 1, June 17, 2021 10:00 a.m.) — Coronavirus lockdowns that grounded planes and emptied hotels and resorts made tourism an unreliable economic engine last year, and recovery would highly depend on how fast the Philippines can exit the pandemic.

Tourism direct gross value added (TDGVA) accounted for 5.4% of the country’s gross domestic product (GDP) last year, significantly smaller than the industry’s 12.8% share in 2019, data from the Philippine Statistics Authority (PSA) released Wednesday showed.

In absolute terms, the tourism sector’s total contribution to the economy last year amounted to P973.31 billion only, plummeting 61.2% year-on-year. While the slump was significant, it was nevertheless expected after the Duterte administration sealed off the country’s borders last year in a desperate bid to arrest the coronavirus spread.

"For an industry highly dependent on the mobility and face-to-face interaction of people, the severe damage of the global pandemic crisis is both unprecedented and unavoidable," the tourism department said in a statement.

For Nicholas Mapa, senior economist at ING Bank in Manila, the road to recovery would be a fragile one for tourism, with several travel restrictions still in place following an unexpected surge in infections earlier this year. “We will need to see the economic environment return to pre-pandemic levels, with job security and savings at a high level before we see Filipinos out and about and willing to part with some cash for some rest and recreation,” Mapa said in an e-mail exchange.

Broken down, inbound tourism expenditures, which tracked spending from foreign and balikbayan tourists, sagged 77.9% on an annual basis. This was not surprising at all after foreign arrivals plummeted 82.05% year-on-year to just 1.48 million last year based on tourism department data.

On the other hand, domestic tourism expenditure, which covered spending of Filipinos either for local or international trips, sank a bigger 82.3% year-on-year. Specifically, spending of Filipino tourists abroad contracted 73.2% annually, data showed.

In turn, figures showed internal tourism expenditure, which combines inbound and domestic tourism spending, shrank 81.6% annually in 2020.

The tourism meltdown means thousands of jobs lost. State statisticians reported that the industry employed 4.68 million people in the country, down 18.1% year-on-year. This shrank the sector’s share to total employment to 11.9% from 13.6% in the preceding year.

That said, Leonardo Lanzona, a labor economist at Ateneo de Manila University, believes the government should invest in a social protection program for displaced tourism workers. “Tourism remains vulnerable right now,” Lanzona said in a text message.

It remains unclear whether the Duterte government would stick with its 10-million target for foreign arrivals by 2022, which by now has become ambitiously high. The tourism department is yet to release new targets for 2021, but what is clear for now is that focus had been diverted to supporting local tourism now that Filipinos are permitted to travel to some tourist destinations so long as health protocols are followed.

"As of the moment, local tourism may be picking up because of the easing of restrictions in various parts of the country, particularly, the NCR+8 bubble, and international activity may still have to wait,” Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said.

Editor's note: Included statement from the Department of Tourism