The tourism sector is beginning to rebound as the restrictions implemented in response to the Covid-19 pandemic have been lifted. However, the sector must adapt to various challenges to reach its full potential and drive growth in Emerging Asian economies (ASEAN-10, China and India), according to the Organisation for Economic Cooperation and Development (OECD).

Before the Covid-19 pandemic, travel and tourism generated approximately 12% of GDP in Southeast Asian economies and provided around 11% of employment in Emerging Asia as a whole, stated OECD in its economic outlook for Southeast Asia, China and India for 2023 released today (April 2)..

The return of tourists will therefore be key to further bolster economies amidst uncertainties and weak external demand, it added.

According to the OECD, the growth in Emerging Asia is proving resilient with real GDP growth in 2023 projected to 5.3 % on average and by 4.6 % on average in Asean economies alone.

The export sector helped boost economic growth and maintain the momentum of the region’s economies, though it has weakened recently.

Inflation combined with interest rate differentials among countries increase the volatility of capital flows and put pressure on local currencies in the region. Ongoing supply-side bottlenecks threaten food security and may lead to even higher prices of goods and services which could impact both external and domestic demand, it added.

It is composed mostly of micro, small and medium-sized enterprises, many of which require assistance in digitalising their operations. Their workers also need to enhance their digital skills to enhance productivity, and informal and migrant workers need to be integrated into social support systems.

These factors, combined with more demanding working conditions and lower wages than in many other sectors, have made recruitment difficult. As tourism continues to pick up, there is a risk that the recovery could stall where labour forces are not large or skilled enough, stated OECD.

There is also a need to adapt to new travel preferences post pandemic. In addition to local travel and rediscovery, the confinement of lockdowns and focus on illness prevention reinvigorated desires for nature tourism or experiences focused on health and wellness, added the report.

According to OECD, the post-lockdown reopening of China will serve to counterbalance and provide a necessary economic boost for the region.

Developing stronger transportation links, especially low-cost airlines, could promote more intra-Asean tourism, especially to destinations that receive relatively few international travellers.

India remains a largely untapped source market despite its large population and certain Southeast Asian countries could diversify their tourist flows to become less reliant on any single country as a major tourist source, it added

OECD Secretary-General Mathias Cormann said: "The pandemic changed tourist preferences, with greater interest in local travel, nature destinations and wellness tourism. It also heightened awareness of environmental issues, which is an opportunity to enhance sustainable tourism."

"Diversifying and expanding inbound markets by increasing domestic and intra-Asean tourism and addressing the gaps in ICT infrastructure, cybersecurity, and digital skills will help to revive tourism as a growth engine for Emerging Asian economies," he noted.

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