The Effects of Tourist's Expenditure on Malaysia's Economy

Abstract

The tourism industry has various impacts on the economy. It contributes to sales. profits, employment. tax revenue, and income. Tourism is fast becoming Malaysia's second-largest foreign exchange earner, after the manufacturing sector. Tourism receipts contributed 46% to total services receipts between 2002 and 2008, generating a surplus in the services account of Malaysia’s balance of payments. This paper focuses on changes in the output of and imports and value added to the economy resulting from the tourism industry in Malaysia. An open input—output model of tourist impact analysis will be adopted to determine the multiplier effects of each Ringgit Malaysia spent on the output of and imports and value added to the economy. This paper attempts to prove that differences in the expenditure profile among classes of tourists and the changing composition of tourists arriving in Malaysia have important implications for possible policy responses to the economy.