Novel Coronavirus expected to impact economic activity of countries, Pacific island economies will be relatively insulated - ANZ

The ANZ Bank’s latest Pacific Insight states that while the Novel Coronavirus is expected to impact the economic activity of many countries, the Pacific island economies will be relatively insulated.

The international economists in the report state that the number of Chinese tourists to the Pacific are growing but still small, accounting for less than 5% of all visitors in 2019.

Fiji received most of the visitors from China totaling 47,000, followed by Vanuatu who have 4,000 tourists from China and Samoa has about 2,000 Chinese tourists.

The economists, Kishti Sen and Tom Kenny say if the outbreak is contained soon, they think around 15,000 Chinese visitors will be unable to make it to the Pacific in the short term.

However, they say this may be offset by higher arrivals from Australia, New Zealand and the United States.

Sen and Kenny say that economic conditions in these countries, in particular, income growth, are still broadly supportive of international travel.

They say that the unemployment rate in Australian (the Pacific’s largest market) is near all-time lows. While this is not yet translating into a material move higher in wages, continued jobs growth and lower interest rates and taxes are supportive of household disposable income growth.

The economists say while Australian households are cautious, at present, they are still going on holidays and may divert travel plans from Asia to alternative markets over the near-term because of the coronavirus.

They believe that Australia’s bushfires may also lead to some Australians choosing to travel to the Pacific rather than their usual domestic venues.

The Pacific has a well-established brand as a family-friendly and safe holiday destination, so they expect it to pick up some of the up-tick in Australians holidaying overseas.

Governments across the Pacific have implemented measures including travel bans to halt the local spread of the coronavirus.

At present, there are no cases in Fiji, and the Ministry of Health and Medical Services has rolled out enhanced health screenings and treatment guidelines to detect and manage ill passengers travelling to Fiji, in an effort to contain any confirmed cases.

With the diligent monitoring and preparedness all governments are practicing, the economists believe the number of inbound visitors to the Pacific is likely to hold up, this year, especially as the outbreak has occurred during the Pacific’s off-peak tourism season.

This means foreign reserves, GDP, employment and government revenue in tourism-dependent economies, such as Fiji, Vanuatu, Samoa and the Cook Islands, are likely to remain intact.