Resumption of China's outbound travel to boost Malaysia's GDP, says economists

KUALA LUMPUR, Feb. 3 (Xinhua) -- The effect of stronger tourism activity due to the resumption of China's outbound travel could boost Malaysia's gross domestic product (GDP) by at least 1 percentage point, says UOB Global Economics &Market Research on Friday.

The research house's economists Julia Goh and Loke Siew Ting said in a report that the boost will further support their baseline GDP growth forecast for Malaysia of 4 percent for 2023.

"The uplift will come through further recovery in tourist arrivals, resumption of China outbound traveling, and sustained domestic tourism demand," they said.

According to the economists, the global tourism sector is expected to make a big leap forward this year as China has reopened its borders and eased domestic restrictions since Jan 8, 2023.

The World Tourism Organization projected that international tourist arrivals could reach 80 percent to 95 percent of pre-pandemic levels in 2023 (versus 63 percent in 2022) despite lingering global headwinds.

"The ongoing recovery of travel in Asia and the Pacific alongside China's reopening starting from Jan. 8 this year is deemed as a key catalyst to revive global tourism and economic outlook in 2023," they said.

It is noted that the International Monetary Fund has raised its global growth outlook for 2023 owing to China's recent reopening, which paves the way for a faster-than-expected recovery.

The economists also highlighted that more than 32 million Chinese travelers visited Southeast Asia before the pandemic mainly to Thailand, Vietnam, Malaysia, Cambodia, and Laos.

They also noted that tourism's contribution to Malaysia's GDP was 6.8 percent in 2019 and 6.5 percent in 2018, higher than the average level of 4.4 percent in Asia Pacific.

According to the report, Malaysia registered a 1 percent increase in foreign tourist arrivals to 26.1 million in 2019, the second highest annual inbound tourist arrivals since data began in 1981.

Chinese tourists made up 3.1 million, or 11.9 percent share, to rank as the third source of inbound tourist arrivals for Malaysia in 2019, after Singapore and Indonesia.

Tourism receipts from Chinese tourists totaled 15.3 billion ringgit (3.59 billion U.S. dollars), or 17.8 percent of Malaysia's total tourist receipts in 2019, ranking second and overtaking Indonesian tourists' spending in Malaysia.

The higher spending capacity of Chinese tourists based on average per capita expenditure of 4,921 ringgit (1,156 dollars), also ranks higher than Singapore at 2,022 ringgit (475 dollars) and Indonesia at 3,571 ringgit (839 dollars).

The economists also said that Chinese tourists' spending power had even risen above some matured economies.

They noted that generally tourist receipts flowed into country-specific tourism goods, accommodation, food and beverages, local transportation, and entertainment.

Based on the tourism direct gross domestic product performance, they said the tourism industry helped increase Malaysia's employment by 2.9 percent to 3.6 million people in 2019, which contributed 23.6 percent to total national employment.

They also noted food and beverage serving services and retail trade were the main industries in tourism employment that year.

During the COVID-19 outbreak and the closure of the country's international border for tourism activities in 2020 and 2021, Malaysia recorded two straight years of contractions in inbound tourist arrivals.

The number of foreign tourist arrivals plunged by 83.4 percent to 4.33 million in 2020 and 96.9 percent to 130,000 people in 2021.

Malaysia's total tourism receipts shrank by 85.3 percent to 12.7 billion ringgit (2.98 billion dollars) in 2020 and 98.1 percent to 200 million ringgit (46.97 million dollars) in 2021.

As such, most tourism sub-sectors posted a steep decline for two years in a row, particularly travel agencies, accommodation, and passenger transport.