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A World of Economic Woe Touches Bali

Bali by the Numbers: Balidiscovery.com Deciphers Economic Trends and their Possible Impact on the Island's Tourism.

(12/13/2008) The daily dose of television and print coverage on the world's deteriorating economic condition has many people in Bali's tourism industry concerned on what lays ahead for 2009.

In an effort to address some of this confusion, we've prepared a graphic presentation of what's happening in the economies of a number of key source markets shown on balidiscovery.com.

That date presented shows:

● Most of the member countries of the European Union are now in recession, a situation likely to become universal among all countries comprising the EU as one-by-one they cross the "barrier" threshold of two consecutive quarters of a declining Gross Domestic Product growth needed to be "officially" declared in a state of recession.

● China is unlikely to be able to sustain its 9% rate of GDP growth as factories close in response to lower demand from their traditional markets in Europe and the U.S.. This will result in reduced growth in China as that mega-economy slides into recession.

● While no country is "recession proof," the figures suggest that Southeast Asian countries are weathering the current economic crisis better than their Europeans and American counterparts. However, a prolonged recovery in Europe or the U.S.A. will, over time, lead to a cascading economic downturn in Southeast Asia's regional economies.

● The Australian market, Bali's second most import source of foreign visitors, may manage to escape recession as the Rudd government is spending heavily to buoy consumption. Australia's insulation and isolation from the larger woes of the rest of the world's economies won't, however, remedy the declining value of the Australian dollar, likely to curb the ability of its citizens to undertake a holiday abroad.

● Similarly, careful attention should be paid to our analysis of the shift in the home currencies of Bali's main markets against the U.S. Dollar over the last 12 months. Bali's tourism products are almost universally priced in U.S. Dollars which has made the Island substantially more expensive for most countries whose currencies have generally devalued against the greenback. Notable exceptions to this trend are Japan and Mainland China who have both seen their currencies strengthen against the dollar.

● Tourism observers will be keeping a careful watch on the pricing behavior of Bali hotels as we enter 2009, many of which have increased tariffs by as much as 25% following strong occupancies for most of 2008. Those increases in combination with shifts in foreign exchange rates against the dollar have made the cost of a hotel room increase by the following amounts, depending on country of origin: South Korea (+86%), U.K. (+71%), Australia (+68%), India (55%), Euro spending Europeans (+41%), and Malaysia (+35%). Conversely, a strengthening of the Yen against the U.S. dollar means a 25% price hike in a Bali hotel room is costing the Japanese traveler only 3.5% more than it did one year before.

● Historical models give cause for concern should the current economic circumstance turn into a world-wide recession where a majority of major economies experience a prolonged recessionary downturn. Past behavior suggests that countries faced with such a situation are politically compelled to introduce restrictive trade and commerce barriers that may, in fact, prolong recovery and deepen the economic downturn.



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