- The Washington Times - Tuesday, May 13, 2003

SARS is diminishing the robust growth of Asia and a few other areas hit hard by the deadly virus, but it has had little impact on either the U.S. or global economy.

Growth could be cut by half this year in cities such as Toronto, Hong Kong, Singapore and Beijing that previously had been expanding rapidly but where serious outbreaks of severe acute respiratory syndrome have prompted the quarantine of thousands of people and scared many millions more, economists say.

SARS has claimed more than 500 lives and infected more than 7,000 people in 30 countries since it emerged in a rural province of southern China in November. The death rate has risen to 15 percent, according to the World Health Organization.

“We know it has had a very major negative impact on air transport, obviously, vacations — all aspects of the types of holiday parts of our economy, which rest on travel and visits,” Federal Reserve Chairman Alan Greenspan told the House Financial Services Committee earlier this month.

“Since a fairly significant part of Southeast Asia does rest on travel and tourism, it is beginning to have some effects, specifically in Hong Kong, to a lesser extent in Singapore and China,” he said.

“But it is pretty much contained in that area,” he said. “There is very little evidence that, outside of the tourist-related aspects of the economies in Southeast Asia, that much has been impacted.”

Mr. Greenspan said “there is just no evidence” of significant damage to the U.S. economy thus far. No one has died from SARS in the United States, despite a few dozen suspected cases.

The Fed is monitoring the progress of the disease, out of concern that it could hurt the United States by, for example, disrupting the “just-in-time” procedures used by manufacturers to lower their cost of carrying inventory by ordering goods only when they are needed, Mr. Greenspan said. Many suppliers of U.S. technology companies are in Asia.

Airlines expect to lose about $10 billion this year and have drastically cut flights to areas being shunned by consumer and business travelers.

Since the virus was identified as a global health risk by the WHO in March, passenger volumes have dropped as much as 60 percent in Hong Kong, 40 percent in Singapore and Seoul, and 37 percent in Beijing and Kuala Lumpur, Malaysia.

“The impact has been much, much greater than what happened in the Iraq war,” said Giovanni Bisignani, director of the International Air Transport Association. Even in countries not affected by SARS, passenger volume is down 10 percent to 15 percent, he said.

Four major hotels in Shanghai, China’s biggest city, are closing for up to three months due to lack of guests, employees said yesterday.

The closures of the Peace Hotel, the Shanghai Hotel, the Jinjiang Tower and the Donghu Hotel follow the steep decline in travel.

Restaurants and stores in affected areas also are reporting big losses as people stay home to avoid getting infected, or flee to areas not hit by the disease.

On Friday, Oracle Corp. said software sales in Asia have slowed as customers quarantine workers and close offices to cope with the virus.

But recent signs that the disease is tapering off in regions outside mainland China have raised optimism that the worst may be over. A falling number of cases in Vietnam, Singapore, Toronto and other cities recently prompted the WHO and U.S. Centers for Disease Control and Prevention to lift earlier travel advisories.

“If the disease is contained soon, the macroeconomic impact in Asia should be manageable, given the robustness of the economies in the region,” International Monetary Fund spokesman Thomas Dawson said. “The impact on the global economy should therefore be limited.”

The ultimate impact of SARS cannot be known, he said, because no one knows whether the virus, for which there is no cure or vaccine, will make a comeback, possibly in a more virulent form or maybe in a milder form.

Morgan Stanley & Co. estimates that SARS will have a minimal impact on world growth, shaving it this year from 2.5 percent to 2.4 percent, with $31 billion in losses mostly in travel and retail businesses in affected areas.

Some fear the damage in China, where SARS continues to spread apparently because of a belated government response, could be substantial.

“If the epidemic is not put under control, there would be some impact on the manufacturing in China because this period to June is very critical for orders coming from the U.S. and other export markets,” said World Bank economist Homi Kharas.

Still, Mr. Greenspan said he expects only a “modest” effect on China’s fast-growing economy, noting that the few thousand cases of SARS in China thus far affect a negligible portion of the Asian giant’s 1.3 billion population.

Economists do not expect much-diminished growth in the strongly growing economy of Canada, which also has been hit by the disease, though Toronto may take time to recover from an outbreak of the virus there this spring. Tourism officials there have begun a massive campaign to lure tourists this summer.

The smaller economies of Hong Kong and Singapore are experiencing the biggest losses. The World Bank last month said growth could be wiped out altogether in Hong Kong this year.

To stave off a recession, the Hong Kong government has announced a $1.5 billion economic stimulus and relief package. Jaqueline Willis, director of Hong Kong’s trade office, said activity is picking up as the epidemic has tapered off and people become convinced it’s safe to emerge from their homes.

Burhan Gafoor, press secretary to Singapore’s prime minister, said growth there will be cut in half from the 2.5 percent-to-5 percent range the country was expecting before the epidemic.

He said officials in the region are holding their breath to see if the epidemic has an even deeper impact on growth by prompting businesses to cut back on investments there.

A drop in Asian stock markets since March suggests that investors have become increasingly wary about whether Asia can maintain the dynamic growth rates achieved before SARS.

China’s stock markets in Shanghai and Shenzhen reopened yesterday after a 10-day closure due to SARS.

China has been the world’s top destination for new business investment, Mr. Gafoor noted, but the epidemic is raising questions about the reliability of basic public health services there and could undermine the record investment boom China has experienced.

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