SARS will curb growth rates in Asia, S&P says
SARS will curb growth rates in Asia, S&P says
Agence France-Presse, Hong Kong
International rating agency Standard and Poor's said on
Tuesday that the outbreak of Severe Acute Respiratory Syndrome
(SARS) would lower growth rates in much of Asia this year, with
Hong Kong taking the brunt of the damage.
The agency said the virus has affected not just tourist
arrivals and consumer spending, but also business operations and
investments with potential impact rising with each new case and
death.
"Notwithstanding the gloom, the ratings on Asia-Pacific
sovereigns should ride out the ravages of the virus, although it
will add to governments' fiscal burdens," Standard and Poor's
said in a statement.
It said although SARS does not appear as deadly as other
diseases, it is affecting the way people interact, with many
people choosing to avoid public places. In turn, this is harming
confidence and consumption.
SARS has claimed some 143 lives worldwide and is believed to
have infected at least 3,400. Hong Kong and China are the worst
hit.
"Nevertheless, if the virus proves more virulent than initial
estimates, economic dislocation and sustained budgetary
deterioration could put pressure on sovereigns whose fiscal
position is stretched for their rating level, especially those
with negative outlooks, including Hong Kong," it said.
"In addition, the duration and eventual eradication, or just
containment, of the outbreak will also affect economic prospects
and budgetary outcomes," the agency said.
Ping Chew, director in Standard and Poor's sovereign ratings
group, said "the adjustments in each economy are largely
proportionate to the gravity of the outbreak, and to the
importance of tourism and domestic consumption to the economy."
Under the agency's current base-case scenario that the virus
is eventually controlled, the damage to real economy, public
finance, and public health, is likely to be short-lived, and
underlying credit fundamentals should remain unchanged.
"Sovereigns with stronger fiscal flexibility will cope with
the impact are likely to endure the temporary set backs, and
provided those with unsustainable deficits take quick remedial
actions post-SARS to achieve fiscal consolidation rating should
remains as the are," Standard and Poor's said.
"Nevertheless, if the base-case scenario proves too benign,
the threat to ratings from fiscal pressures will increases in
line with any outbreak," said Chew.
"Several sovereigns already have negative outlooks assigned to
their rating, and all have fiscal pressures to blame," he said.