Tourism Can Lift the Economy
Foreign tourists are back in the Philippines, and this is evident in the increased number of flights this year, with many airlines announcing fleet expansion to support demand.
Tourists of different nationalities can be spotted dining at cafes or shopping at malls in central business districts as well as popular island destinations, such as Cebu, Palawan and Boracay.
If this trend continues, we may have stronger economic activities in the fourth quarter. Tourism helps uplift the economy because of its major roles in stimulating mobility, recirculating money in the provinces, supporting businesses and services, and creating jobs.
We are aware that many tourists are also business owners in countries where they come from, so a pleasant travel experience in the Philippines could encourage them to consider investing here or buying a condominium unit, which contributes further to overall economic growth.
Global travel is now actually near the pre-pandemic level. Many nations lifted the mandatory use of face masks after the World Health Organization (WHO) declared an end to Covid-19 as a public health emergency in May 2023. The WHO advice encouraged people to travel again, either for leisure, work or business.
The International Air Transport Association (IATA), a group of airline operators, reported that as of August 2023, passenger traffic, as measured in revenue passenger kilometers or RPKs, was up 28.4 percent year-on-year or 95.7 percent of pre-Covid levels.
Asia-Pacific airlines, in particular, posted a 98.5-percent increase in August 2023 traffic from a year ago. In the Philippines, passenger traffic for international flights in June 2023 was registered at 75 percent of 2019 levels. This is expected to significantly improve in the third and fourth quarters of 2023.
Many airlines nearly collapsed at the height of the pandemic from 2020 to 2022 as most aircraft were grounded. This year provides them renewed hope about launching more flights, recouping their losses and hiring back their crew.
Philippine Airlines, Cebu Pacific and Air Asia Philippines are among the carriers that reported expansion plans to launch more flights and serve more passengers. Per Cebu Pacific CEO Michael Szucs, “Philippine carriers will need to quadruple in size to cater to growing demand.”
I agree with the general observation in the recent Philippine Aviation Summit that the Philippines can become an Asean hub, given the country’s large young middle class, increasing wealth, impressive economic growth and massive tourism potential.
This is why the government is preparing transport infrastructure like airports. Per Department of Transportation Secretary Jaime Bautista, the rehabilitation of the Ninoy Aquino International Airport (Naia) through a public-private partnership agreement presents a “landmark opportunity for economic growth, improved infrastructure and a world-class travel experience.”
Tourism, which is a part of the services sector along with business process outsourcing and labor exports, also helps stabilize our balance of payments. It could partially cover our huge trade deficit that reached more than $58 billion in 2022.
Meanwhile, Department of Tourism Secretary Christina Frasco disclosed in a Senate budget hearing that international tourism receipts in the Philippines amounted to P344 billion in the first nine months of 2023, as visitor arrivals surpassed four million. This is supported by the report of global travel data provider Official Airline Guide (OAG), showing the Philippines’ departing seats reached 4.2 million as of September 2023, or equivalent to 90-percent recovery from the 2019 figure.
Arrivals in 2022 reached just 2.65 million, or only half of the total in the first three quarters of 2023, per the DOT. Secretary Frasco estimated the tourism’s share to the gross domestic product (GDP) improved to 6.2 percent this year.
While the International Monetary Fund and the World Bank revised down their 2023 growth forecasts for the Philippines to 5.3 percent and 5.6 percent, respectively, amid the global slowdown and elevated inflation, the fourth quarter—marked by the long holiday season in the Philippines—presents a silver lining in the form of recharged tourism.
I believe we could still achieve the government’s growth target band of 6 percent to 7 percent for the year, if we could take advantage of increased visitor arrivals in the fourth quarter and turn tourism into a major economic growth driver. I remain upbeat and won’t be surprised if the economy generates better numbers in the last quarter of 2023.