Palau is anticipating a further drop in tourism revenue with the president asking his ministers and government to "exercise financial caution" as they ride out what he calls a "black eye" amid the coronavirus fears.
Palau, which relies on tourism, has experienced a nearly 50 percent drop in arrivals in February and tourism officials say it's expecting a further drop in March.
Tommy Remengesau Junior told his Cabinet that world travel had experienced a dip as a result of the Covid-19 coronavirus outbreak "with travellers staying close to home for fear of contracting the virus that has claimed nearly 3000 lives."
The president said the government could save money by scaling down travel and hiring.
Mr Remengesau also asked the Bureau of Tourism and Visitors Authority to work with the private sector to assess business projections with hotels and the industry already bracing against impacts of the outbreak as many of them have already received several cancellations.
However he was still optimistic, saying Palau had recovered from similar situations in the past, including the severe acute respiratory syndrome (SARS) and Middle East respiratory syndrome (MERS) outbreaks of a few years ago.
"Review your finances and make necessary expense cuts…we will overcome this," Mr Remengesau said.
Health officials assured the president that they were continuing all efforts to prevent the virus from entering Palau.
The death toll from the flu-like disease has passed 3000 worldwide. The disease appears to be spreading more rapidly outside China, where the virus emerged.