Domestic tourism-related sectors have been impacted following the travel restrictions by the Malaysian government on travellers from the province of Hubei, Zhejiang and Jiangsu as well as some travellers or tourists delaying or cancelling travel plans to this part of the region. — AFP photo
KUCHING: The direct impact from lower tourist receipts, as a result of the Covid-9 outbreak, is estimated to result in a direct 0.5 percentage point reduction in Malaysia’s gross domestic product (GDP) growth.
Affin Hwang Investment Bank Bhd (AffinHwang Capital) in its latest economic update saw that in the latest fourth quarter of 2019 (4Q19) GDP report, Bank Negara Malaysia (BNM) cautioned that near-term growth prospects will be weighed by the ongoing Covid-19 outbreak, where it anticipates the negative impact to be felt mainly in tourism-related sectors as well as the manufacturing sector through disruptions within the global supply chain as well as the expected slowdown in China’s economic growth.
“We concur with the assessment made by BNM that the immediate negative impact on the country’s economy will be from tourism-related sectors,” the research firm said.
“During the Severa Acute Respiratory Syndrome (SARS) outbreak, Malaysia’s real GDP growth slowed for two quarters between 1Q03 and 3Q03, but the negative impact was mostly felt in 2Q03, where growth slowed to 4.6 per cent year on year (y-o-y) due to lower private consumption growth.
“In 2003, the tourist receipts accounted for 5.1 per cent of GDP (at current prices), with tourist arrivals declining by 20.6 per cent y-o-y in 2003.
“Tourist arrivals into Malaysia fell for four consecutive months between January and April 2003, amounting to a loss of nearly 800 thousand tourist arrivals during that period. Arrivals only returned to their ‘pre-breakout’ level by December 2003.”
AffinHwang Capital observed that domestic tourism-related sectors have been impacted following the travel restrictions by the Malaysian government on travellers from the province of Hubei, Zhejiang and Jiangsu as well as some travellers or tourists delaying or cancelling travel plans to this part of the region.
It noted that according to the Tourism, Arts and Culture Ministry, Malaysia’s tourism industry has already seen a loss of RM3 billion from cancellations and bookings from the airline, hotels, homestays and the cottage industries due to the outbreak.
“Tourists from China make up a large proportion of Malaysia’s tourist arrivals and this has been steadily increasing from four per cent of total arrivals in 2003 to 12 per cent in the first nine months of 2019.
“However, as a percentage of total tourist arrivals into Malaysia, bulk of the tourists are from Singapore (39.1 per cent), Indonesia (13.9 per cent), China (12 per cent), Thailand (7.2 per cent) and Brunei (4.6 per cent) in the first nine months of 2019.
“As for tourist receipts in 2018, most of it were from Singapore (32.4 per cent), China (14.6 per cent) and Indonesia (13.2 per cent) totalling RM50.6 billion.”
Overall, AffinHwang Capital believed that a slowdown in the tourism sector is significant as the value-added of Malaysian tourism sector contributed to about 15.2 per cent of Malaysia’s GDP in 2018 from 14.6 per cent in 2017, while tourist receipts contribute to about seven per cent of Malaysia’s GDP.
The research firm also believed that tourist arrivals not only from China but from the neighbouring countries to be slower in 1Q20 as tourists would have delayed or cancelled their travel plans.
Domestically, it projected recreational activities such as movies, dining out and shopping will be slightly affected during the quarter.
“For 2020, Tourism Malaysia is targeting tourist arrivals to rise by 6.8 per cent y-o-y to 30 million in 2020 (28.1 million targeted in 2019), while tourist receipts are projected to expand by 8.5 per cent y-o-y to RM100 billion in 2020 (RM92.2 billion in 2019).
“Based on our own estimate, using the assumption that the Covid-9 outbreak may lead to a 30 per cent decline in tourist arrivals, which could translate to a loss in tourist receipts of about RM30 billion in 2020, the direct impact from lower tourist receipts is estimated to result in a direct 0.5 percentage point reduction in Malaysia’s GDP growth.
“In view of the immediate impact on the country’s tourism-related sectors, and the estimated loss in tourist receipts, with Malaysia’s GDP growth dragged by around 0.5 percentage points, we have revised our real GDP growth projection down to four per cent for 2020, from an earlier forecast of 4.5 per cent.”