KUALA LUMPUR: The tourism recovery in Asia Pacific (APAC) is expected to continue in 2024, albeit more slowly due to less favourable base effects, Fitch said.
The firm forecast the visitation volume in the region to reach 92 per cent of the 2019 level, up from 65 per cent in 2023.
International tourism receipts in nominal US dollars will exceed the 2019 level by about 6. 0 per cent this year.
"Our baseline assumption is that a full recovery of international tourism arrivals in APAC will materialise in the first half of 2025," it said today.
Most Fitch-rated sovereigns in APAC have recovered from the services balance shock due to the collapse in tourism revenues, although the pace of recovery continues to vary across the region.
The tourism recovery in 2H24 is underpinned by the region's general economic resilience to global challenges, additional flight capacity, remaining pent-up demand from major visitor markets, policy efforts to reignite tourism, and local-currency weakness.
International air passenger traffic in China gradually improved to roughly 80 per cent of 2019 levels in the first five months of 2024 from 40 per cent in 2023.
A surge in Chinese outbound tourism in 2024 to date has been one of the main drivers behind stronger visitor arrivals in some APAC destinations like Singapore, Vietnam and Thailand.
Fitch, however, expects relatively restrained spending by Chinese travellers to continue amid lingering economic challenges, including in the property sector.
"We expect the prospects for the tourism recovery will remain vulnerable to multiple risks, such as a slow restoration of air traffic, higher airfares and energy prices, and heightened 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."
Fitch said the impact of climate change, such as rising sea levels, coastal floods, extreme weather events and coral bleaching, is relevant for economies that depend more 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."
Fitch also expects the credit buffers of most Fitch-rated APAC sovereigns to be sufficient against the risks of a sharp tourism downturn.
However, it sees greater vulnerabilities in frontier markets, and the destinations where tourism plays a significant role in the economy and public finances have deteriorated in recent years, such as Thailand.
Frontier-market sovereigns with worsening external financing and liquidity, like the Maldives, are more exposed to a scenario where a large exogenous shock leads to reduced tourism receipts.