The coronavirus pandemic is wreaking havoc on Palau’s tourism industry which could translate to massive job losses and closure of tourism-related businesses, according to the latest issue of the Asian Development Bank’s Pacific Economic Monitor (PEM) launched yesterday.
“Depressed economic activity will translate to massive job losses. The pre-pandemic tourism downturn already took its toll on the labor market, with employment falling by 1.7% in FY2019,” the PEM said.
The report said reduced economic activity will further result in the loss of more than 3,000 jobs by the end of FY2021 due to the bleak economic future of the tourism sector.
The report said Palau, which heavily relies on tourism mostly from East Asia, has the distinction of being the first nation in the Pacific hardest hit by the economic cost and absence of tourists brought by the pandemic before its subregional peers.
Palau’s tourism receipts is the equivalent of 40%–50% of its gross domestic product and with a stagnant tourism sector, the economy is forecast to contract by as much as 9.5 percent in the Fiscal Year 2020 and will further decline by 12.8 percent in 2021 if international travel restriction remains.
The nation might have escaped the health costs of COVID-19 due to border closure, but extended travel restrictions would further strike a big economic blow to the tourism-linked sectors, including hotels, restaurants, transport, and retail trade.
According to the Palau Visitor’s Authority (PVA) Tourism Stakeholder Survey and Consultation Report, 70 percent of tourism-related companies will be forced to shut down their operations by January 2021 as border closure continues.
Businesses and their staff experience hardship resulting in cutting employee’s working hours, laying off employees, and reduced staff wages. The challenges are further felt by the cost of rent and struggle with the payment of Social Security and Health Care Fund every quarter, the survey said.
The government established a $20 million Coronavirus Relief One Stop Shop (CROSS) program to provide temporary assistance to the private sector through direct relief measures in the form loans to businesses to cover fixed costs, unemployment benefits and expanded lifeline utility services to cover COVID19-affected households and survey showed that most of the respondents are happy with the relief.
However, there is uncertainty about how long the relief would last.
The government is preparing a plan to re-open the economy but did not cite a timetable.
According to the survey, at least 31 percent of the stakeholders surveyed would prefer to reopen the economy by the end of 2020.
The survey showed that 80% of businesses are willing to open their establishments to tourists coming from low-risk countries such as Taiwan.

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