Impact of 2019 coronavirus outbreak on tourism and the economy (Part 2)

By: Fernando Fajardo February 12,2020 - 07:35 AM


The World Travel and Tourism Council (WTTC) reported that in 2017 the total benefits that travel and tourism gave to the Philippines amounted to P3,348 billion (US$66.3 billion), about 21.1 percent of the country’s gross domestic product or total output of final goods and services at nominal prices.

The total consists of P1,378 billion (US$27.3 billion) or 8.7 percent in direct contribution and another P1,970 billion (US$39.0 billion) or 12.4 percent in indirect and induced contribution to the economy. This implies a high multiplier of 2.4, which means that for every peso or dollar directly contributed to the economy another 1.4 pesos or 1.4 dollars are created in indirect and induced contribution to the economy.

The direct contribution of travel and tourism to the economy reflects the ‘internal’ spending by residents and non-residents visiting a place for business and leisure purposes as well as government spending on travel and tourism-related services directly linked to visitors.

The indirect and induced impact, on the other hand, includes all investment spending for hotels and restaurants facilities, transport facilities, and other structures made by the private sector and investment spending for land, air and sea transport, for example, and other facilities and  activities of the government to promote tourism, including other induced spending by workers directly benefited tourism.

Job multiplier

While travel and tourism contribute a lot to GDP, in the Philippines their greatest contribution is greatly felt in job creation. 

Based on the same WTTC report, travel and tourism contributed 7,906,500 jobs in 2017 in the country. This is divided into 2,348,000 direct and another 5,448,500 in indirect and induced contribution to the country’s total employment.

In all, the job multiplier of travel and tourism is very high at 3.3, which means that for every one job directly created, 2.3 more jobs are also created in the rest of the economy.

What will happen to all the benefits that come with travel and tourism with the danger to our lives that come with the spreading coronavirus from China?

Naturally, travel and tourism activities are slowing down now as the different countries in the world restrict entry from anyone who comes from or passes through China. With China being one of the biggest sources of travelers and tourists in the world now, the effect is huge.

Last year, China’s GDP alone was measured at $14.14 trillion at nominal US dollar or $27.31 trillion in purchasing power parity (PPP) after adjusting for price differences in the world in relation to the US. The large GDP of China explains why many Chinese now can afford to travel internationally.

Like the rest of the world, China’s travel and tourism industry contributes to about 10 percent of its GDP. With almost a third now of China on total lockdown or closed from people going out or coming in, that contribution to its economy will be greatly cut down with a tremendous global impact.

Domestic tourism

One might say that in reality domestic tourism is a much greater force than international tourism, and that therefore, not badly affected by what is happening in China. Yes but the Philippines and other countries close to China are also experiencing not just the loss of foreign tourist arrivals, but domestic travel as well as a precaution to the menacing effect of the spread of the coronavirus brought in by Chinese tourists, who came in large numbers in time for the last celebration of the Chinese New Year.

Indeed, in 2017, domestic tourism represented 73 percent of the total global tourism expenditures (US$3,971 billion), with China accounting for 62 percent of global absolute growth in domestic spending over the past 10 years. That now is almost totally halted in China, and that whatever good things spread by Chinese tourists as they travel the world are also gone now.

Of course, this is only temporary or as long as the coronavirus remained uncontrolled, but it is almost a month now that this is happening. How long will this last?

Who knows? /dbs

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