Analysis: Malaysia may miss 2026 tourism target amid global uncertainties

KUCHING (March 17): Malaysia could receive around 44 to 45 million international visitors in 2026, representing a shortfall of roughly 2 to 3 million arrivals from the official target, according to TA Securities.

The research house in a note on Monday said the government’s goal of attracting 47 million visitors under the Visit Malaysia Year 2026 (VMY26) campaign is becoming increasingly ambitious given the persistent geopolitical tensions and global economic uncertainties.

“The recent escalation of tensions in the Middle East — notably the US-Israel war
with Iran — has introduced an additional layer of volatility to global travel and
tourism flows.

“Disruptions in airspace over key Middle Eastern corridors, coupled with more than 20,000 flight cancellations reported in early March 2026, have significantly affected connectivity between Europe and Asia.

“Given that a substantial portion of intercontinental traffic between these regions transits through Middle Eastern hubs, the repercussions have been both immediate and far-reaching,” it said.

While stronger airline connectivity and intensified global marketing efforts are expected to support tourism demand, TA Securities said downside risks to travel sentiment could limit growth momentum.

“Regional markets particularly Singapore, China, Indonesia, India, and Thailand are likely to remain the main drivers of arrivals given their proximity and strong connectivity, but achieving the official target may prove challenging under a less supportive external environment,” it said.

While visitors from the Middle East only account for only about 162,000 visitors or 0.4 per cent of Malaysia’s total arrivals, the house said travellers from the Gulf region typically have higher spending power and longer stays.

This means that any sustained disruption could weigh on tourism receipts and higher-value segments of the market.

As such, it said the potential shortfall of 2 to 3 million visitors is therefore not due to the Middle East alone, but rather from indirect spillovers.

“Middle Eastern hubs serve as key transit points for European and other long-haul travellers, and disruptions or higher travel costs reduce arrivals from these high spending markets,” it said.

More broadly, it said inflationary pressures and weakening global consumer sentiment may pose a greater downside risk to international travel demand.

“Rising living costs in major source markets could constrain discretionary spending, prompting households to postpone or shorten leisure travel.

“This risk is particularly relevant for long-haul markets, where higher airfares and accommodation costs form a larger share of overall travel expenses,” it added.

Under a more adverse scenario, it believes that prolonged geopolitical tensions or broader economic weakness could further see international arrivals easing to around 42 to 43 million visitors.

Nevertheless, TA Securities said the downside risk may be cushioned by resilient short-haul regional demand particularly land-based travel from Singapore and Thailand, which continues to form the structural backbone of Malaysia’s tourism flows.

Looking ahead, the house said the VMY26 targets of 47 million visitor arrivals and RM329 billion in tourism receipts suggest that tourism’s contribution to GDP could exceed 16 per cent by 2026, up from an estimated 15.6 per cent in 2025.

However, it cautioned that the outlook remains sensitive to external conditions.

If visitor arrivals fall short of the official target and tourism GVA expands at a slower pace of around 7 per cent instead of 9 per cent, the sector’s GDP contribution could moderate slightly to around 15.9 per cent, reflecting the sector’s dependence on international travel demand and broader global economic conditions.