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Coronavirus impact on APAC tourism

05 Jan 2022

  • Update for 4Q21 by Fitch
International travel remains subdued across the Asia-Pacific (APAC) as border restrictions are being reimposed amid the Omicron Covid-19 variant. APAC economies have been slower to ease cross-border travel restrictions than other regions, even before Omicron, due to local outbreaks and slow vaccination rollouts, especially in South Asia and ASEAN. Subdued tourism prospects Travel prospects are a key rating driver for tourism-dependent sovereigns. Tourist arrivals have been well below pre-pandemic levels across APAC, with the exception of the Maldives (B-/Stable), which was among the first APAC economies to reopen to tourism. The Maldives saw visitor flows rebound, especially from India and Russia, which may partly reflect diversion from competing destinations with tighter border controls. Better recovery prospects and reduced external vulnerabilities supported an October rating upgrade from “CCC”. Omicron delays reopening Many APAC economies had been implementing reopening strategies prior to the Omicron variant, driven by falling virus cases and accelerating vaccine rollouts. This was led by Thailand’s (BBB+/Stable) easing of border restrictions in early November, followed by Vietnam (BB/Positive), Malaysia (BBB+/Stable), and the Philippines (BBB/Negative). However, the emergence of Omicron has upended reopening plans for the time being in some economies. Japan (A/Negative) has prohibited foreign visitors since late November, while Thailand tightened quarantine-free entry applications for inbound travellers for a two-week period in mid-December, with the exemption of the “Phuket Sandbox” scheme initiated in July 2021. Singapore (AAA/Stable) has temporarily suspended flight ticket sales for the “vaccinated travel lane” scheme. However, not all economies have shelved reopening plans. Australia (AAA/Stable) extended its travel bubble scheme to Japan and Korea in mid-December, despite a short delay. Implementation challenges remain Fitch Ratings expects a slow recovery in international tourism across APAC during 2022, despite higher vaccination coverage and stepped-up reopening efforts. The evolving global epidemiological situation poses a high degree of uncertainty and a tourism recovery in destinations with low vaccination rates, such as the Philippines and Indonesia (BBB/Stable), will remain vulnerable to setbacks. Pent-up travel demand remains to be diverted domestically, as we believe it will take time to restore confidence in cross-border travel safety. It is also expected that China (A+/Stable) maintains its “zero-Covid” policy through most of 2022, with quarantine-free travel corridors set up only for Macao (AA/Stable) and Hong Kong (AA-/Stable). China was a key source market for tourism-dependent economies, such as Thailand, pre-pandemic.


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