TOKYO/BANGKOK -- Cratering demand for travel in the wake of the new coronavirus outbreak is battering Southeast Asian economies heavily dependent on tourism.
As cross-border travel slows to a trickle after the World Health Organization declared COVID-19 a pandemic, Nikkei estimated that eight of the 10 members of the Association of Southeast Asian Nations will incur deficits if the number of foreign tourists drops by half for the year.
The region is already struggling with weak currencies, and fewer tourists will likely exacerbate the problem of mounting external debt, exposing the dangers of over-reliance on tourism to fuel economic growth.
"There are about 60% to 70% fewer Chinese tourists compared to other years," lamented a waiting tour driver near the Grand Palace in Bangkok, one of the most popular sightseeing spots in the Thai capital.
Pathways around the palace, which are usually awash with tourists, are empty these days, leaving many souvenir and beverage shops shuttered.
Thailand experienced a 4% drop in tourism revenue in January from a year earlier. Bangkok-based hotel operator Minor International recorded occupancy rates at just over a dismal 50% in February, and is expecting a significant loss in first quarter revenue from last year.
Southeast Asian economies have become heavily reliant on free-spending domestic and foreign tourists, who contributed 13% to regional gross domestic product in 2018 -- the second highest after the Caribbean, according to the World Travel and Tourism Council.
Services for foreign tourists generated $220 billion in regional revenue in 2018, more than the $50 billion from automobile manufacturing and $160 billion from coal an oil production.
Nikkei estimated that the 10 ASEAN members face a combined deficit of nearly $40 billion if the number of foreign tourists plunges by half in 2020 from 2018. This would soar to $150 billion if the number drops to zero.
The region last logged a current-account deficit in 1997, during the Asian financial crisis.
Burgeoning deficits force countries to rely on foreign capital for financing. But if a currency weakens too much, it faces pressure from speculative investors, who often bet against the currency as external debt piles up.
Malaysia's external debt stands at more than 60% of GDP, over twice its foreign currency reserves. Indonesia's stands at three times its reserves. In comparison, Thailand's debt equals nearly 80% of its reserves, having risen 20 percentage points over the past decade.
Hammered by volatility in global markets, the currencies of Malaysia, Indonesia and Thailand have lost about 5% against the U.S. dollar since the end of last year. Moreover, the three countries were hit last week by sell-offs in their currency, stock and bond markets. The three countries are now facing the risk of capital flight.
Thai research firm Kasikorn Research Center estimated that Thailand's economic losses will total 400 billion baht ($12.58 billion) if the coronavirus pandemic continues until September.
Countries are pulling out all the stops to contain the economic fallout. Thailand has introduced low-interest loans and deferred income tax payments for its tourism industry. Singapore has included an anti-coronavirus outlay of 6.4 billion Singapore dollars ($.4.52 billion) in its draft budget for fiscal 2020. It will also provide financial support for tourism, retail and three other sectors hit hard by the pandemic.
Overseas tourists are a major source of foreign currency for Southeast Asian nations and help drive economies. Revenue from foreign tourists accounts for 18% of GDP in Cambodia and 14% in Thailand. The average for ASEAN members is 5%, much higher that the roughly 1% for Japan and South Korea.
The coronavirus outbreak will likely prompt some Southeast Asian countries to revise their growth strategies to lessen dependence on tourism.