Increase in visitors not enough to cover costs
The increase in numbers of visitors last year over the previous year is encouraging but it would pay to hold one’s breath until all the receipts actually come in.
We have no idea yet what that increase in numbers translates into in terms of revenue from these visitors for the 2009/2010 financial year.
Those visitors who are Cook Islanders normally resident overseas, normally stay with relatives and from all accounts, do not spend much while they are here. Their presence only causes locals to spend more to support them.
Ministry of Finance (MFEM) predictions are that in 2009/2010 visitors will spend $219.6m. If they do it will be a 5.4% increase on the previous year. MFEM advise visitors actually spent $203.5m in the 2008/2009 year. This is a moderate 1.4% up on the 2007/2008 year.
Government’s cut through VAT, departure tax and other fees (Driver’s licenses issued by the Police and medical bills for vehicle accidents) will not be enough in 2009/2010 to boost the revenue pool to balance the books.
According to MFEM forecasts in the Half Yearly Economic and Fiscal Update issued in December 2009, although there is an estimated $3.9m surplus on the operating balance in the 2009/2010 year, when the non-operating balance is taken into account, there is a estimated deficit of $5.6 million. And deficits are expected in the out years.
So while visitor numbers are going up and visitor expenditure is tracking up, moderately, government spending and debt has also increased. This has forced government to review its expenditure to revenue and expenditure to GDP ratios for various categories.
With tourism being our major money earner, from here on due to forecasted deficits, government needs to be careful that any gains made through tourism are not seriously impaired because of spending.
Headlines : Times 290 02 March 2009
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