Virus infects Asia's economies

Virus infects Asia's economies

Face masks are selling briskly, but little else is

A deadly pneumonia virus that has killed more than 50 people around the world could be worse for the Asian economy than the Iraqi war, economists have calculated.

Although cases of the virus - known as Severe Acute Respiratory Syndrome (SARS).- have been detected as far afield as Canada and the UK, they have been concentrated in China, Hong Kong, Singapore and Vietnam.

Being highly contagious, SARS is having a disproportionate effect on the region's service industries, especially tourism, which is forecast to fall by 20% by some analysts.

A number of companies have shut down during the outbreak, high-profile entertainment and sports events have been postponed or cancelled, and retail trade has suffered.

Combined with the region's existing economic troubles, the virus could knock a percentage point off economic growth in Singapore and Hong Kong, according to some forecasts.

Service slump

Although the majority of cases so far have been seen in China, the country is vast enough to suffer no overall economic malaise.

SARS SO FAR: CASES (DEATHS)

Hong Kong - 357 (11)

Singapore - 74 (2)

Vietnam - 59 (4)

Canada - 33 (3)

Britain - 3 (0)

US - 40 (0)

China - 792 (34)

Singapore and Hong Kong, almost wholly dependent on the sort of service businesses that require human contact, are far more vulnerable.

Both rely on tourism for some 5% of their gross domestic product (GDP), and services such as banking account for more than two-thirds of overall output.

The disease is already causing problems for managers of large companies, where increasing numbers of staff are reluctant to turn up for work.

DBS, a large Singaporean bank, has even been forced to complain to local regulators, after a rival allegedly spread rumours that SARS was rife among its staff.

Staying away

The worst-hit industry by far is tourism, a business that is currently small but seen as promising.

Big public events have been early casualties

Arrivals in Singapore are reckoned to be down 20% already, and some predictions say the season as a whole could be hit by as much as 50%.

Part of an international rugby tournament has been cancelled, and the Rolling Stones postponed two Hong Kong concerts.

Singapore Airlines and Qantas have already revised down their forecasts as a result of SARS, and Cathay Pacific has seen its ratings slashed by bank analysts.

So far, the effects have been relatively limited, but economists caution that a prolonged outbreak would have serious repercussions.

Hong Kong authorities are planning a sweeping programme of mandatory health inspections and disinfection, something that is likely to scare off visitors still more.

Tigers tamed

The epidemic has come at a difficult time for Asian economies.

Retail trade is crucial to the local economy

Asia's recovery from the crisis of 1997-98 was cut short by the global slump in demand for hi-tech goods and services - a key export for many Asian economies.

Since then, the stagnant global economy has led to a surge in unemployment around Asia, especially in the once-buoyant economies of Hong Kong and Singapore.

In Hong Kong, the authorities have had to announce tax hikes for the first time in 20 years, in an attempt to combat a mounting public deficit.

Singapore, meanwhile, is effectively in recession, with growth at close to zero for the past six months.