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  • By Ongerung Kambes Kesolei and Bernadette H.

Palau’s economy hit by declining tourism

Koror (Pacific Note)- The weak visitor arrivals for 2018 have put a strain on Palau’s economy with all tourism-related revenues showing a slowdown.

Minister of Finance Elbuchel Sadang told the media at a press conference Wednesday that all the tourism-related revenue registered declines.

“There’s really an effect to the tourism-related revenue,” Sadang said.The downturn in the tourism industry is having an impact on the ability of the national government to meet its revenue collection target.

The government missed its target collection by 8 percent with the Fiscal Year 2018 revenues projected at $91,526,514 but the actual collection only reaching $89,250,541. In the unaudited ROP financial report, the biggest drop in tourism revenue was in the departure fee collected from each tourist in which only 26 percent was collected.

In actual numbers, the national treasury collected $612,240 against the projected amount of $2,312,210. Hotel occupancy tax fell short with $4,577,690 collected – 8 percent less than the budgeted amount of $4,953,732. While revenue collection failed to meet its target amount, finance minister

Sadang said the government recorded actual “revenue in excess of expenditures” of $1.3 million for the fiscal year 2018. “More business activity compliance and the tourists are actually spending their money,” Minister Sadang said.

Sadang noted that the government monitors collections and take appropriate action to balance the budget when revenue falls short of the target.

But while the fiscal year 2018 collection didn’t meet its target, it still recorded 3 percent more in revenue and financing than the fiscal year 2017.T

he revenues in 2017 were $85.7 million compared to FY2018’s $89.2 million. A recently released IMF Article IV mission report disclosed that Palau’s economy has moderately recovered by 0.4 percent and is expected to perform better in 2019 with the projected economic growth of two percent.

Tourism is Palau’s economic driver, in 2015 the government cut the charter flights arriving from China in half citing that the surge in “mass tourism’ is damaging coral reefs and the environment.

By the end of 2014, Palau has experienced an increase in arrivals from Mainland China, dominating the market historically topped by tourists from Japan and Taiwan. The government said Palau do not want to cater to mass tourism and see the declining arrivals as a sign that is it enticing more independent, high spending travelers.

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