SARS could hurt Asia growth more than Iraq war
SARS could hurt Asia growth more than Iraq war
Alan Yonan Jr., Dow Jones, Singapore
The fallout from severe acute respiratory syndrome (SARS) could do more damage to Asian economic growth this year than the war in Iraq, an international brokerage warned on Wednesday as the number of infections continued to grow in the region.
Asia has been the focus of the deadly illness, accounting for more than 1,600 of the 1,804 SARS cases worldwide, according to the latest figures on World Health Organization's Web site. The WHO said 58 of the 62 SARS deaths globally have occurred in Asia, mostly in China and Hong Kong.
The biggest economic impact in Asia thus far has been on the tourism, retail and consumer services sectors, although analysts caution the effects could ripple through the broader economy the longer the deadly illness continues to spread.
BNP Paribas Peregrine has trimmed its 2003 economic growth forecasts for various Asian countries by 0.4 to 1.5 percentage points, and said that compared with the Iraq war, SARS is an "arguably more serious problem.
"The SARS epidemic will cast a long dry spell on tourism and its associated industries. We expect the airline, hotel, trade, retail and property sectors to be adversely affected by the pneumonia problem," Peregrine said.
Singapore, which counts on tourism for nearly 7 percent of its gross domestic product according to Peregrine, would see an estimated 1.5-percentage-point reduction in its economic growth.
The hardest hit Asian city so far, however, has been Hong Kong, where empty airliners, deserted department stores and canceled concerts provide ample anecdotal evidence of the drop- off in tourism and consumer spending.
"The SARS outbreak has deterred foreign visitors (to Hong Kong), but it also keeps locals out of shops," Standard Chartered Bank said in a note to clients.
Things could get even worse for the region's tourism industry if the WHO advises travelers to avoid going to Asia, as is being considered.
In a rare move, the WHO raised its concerns following information from Hong Kong authorities that they have been unable to find a link between new cases there and patients previously infected with SARS.
WHO could decide as early as Wednesday whether it will advise against travel to Asia.
Downward economic revisions for Asia by investment banks, meanwhile, continued to mount.
Morgan Stanley Wednesday cut its 2003 economic growth forecast for Asia ex-Japan to 4.5 percent from 5.1 percent, which was based on the "most optimistic" scenario.
It said its regional revision assumed a 15 percent decline in tourism revenue and a "100 percent multiplier effect on domestic demand in the retail sector."
The GDP estimate was based on a projection that the impact of SARS would last one quarter. Downward revisions for individual countries ranged from 1.1 percentage points for Malaysia to 0.2 point for Indonesia.
"If SARS lasts for two quarters our estimate of GDP impact doubles," wrote Andy Xie, the Morgan Stanley economist who authored the report.
"We want to emphasize that we believe this medical crisis is the gravest since the 1998 Asian crisis. Its ramifications are still difficult to grasp," he said.
Xie added that particularly troubling is China's lack of disclosure regarding the spread of the illness there.
"The new leadership in China is facing its first serious test. Transparency and determined responses are necessary to sustain foreign investors' trust in China," he said.
John Stuermer, an economist at Bear Stearns Investment Co. in Singapore agreed.
"This SARS episode raises questions about the transparency of local government, in addition to the fact that investors may be afraid to visit their investments."
Goldman Sachs estimated that SARS could shave 0.7 percentage point off economic growth in Hong Kong for every quarter the health scare continues. The estimated quarterly impact on Singapore would be 0.5 point, Taiwan 0.3 point and Thailand 0.2 point, according to the report.
Standard Chartered Bank said some travel agencies in Hong Kong have reported declines of up to 90 percent in their volume of business. Other anecdotal evidence has retail traffic down 50 percent, the bank added.
Based on these initial reports, Hong Kong could lose HK$6 billion a quarter in travel service and transport revenue, and HK$3 billion a quarter in hotel, restaurant and retail revenue, Standard Chartered said. The total losses would translate into a 0.5-point reduction in annual GDP, the bank estimated.