Mystery illness stalls Asian economies
By Elaine Kurtenbach
Associated Press
HONG KONG — The mysterious life-threatening illness known as SARS is straining economic activity across Asia, forcing manufacturers to temporarily shut down, bankers to cancel face-to-face meetings and visitors to stay away.
Associated Press
Near-term productivity will undoubtedly suffer, delivering the harshest blow to the struggling travel industry. Economists say the outbreak of severe acute respiratory syndrome will hurt much of the retail and service sectors as consumers avoid malls, restaurants and other forms of entertainment.
Traders at the Hong Kong Stock Exchange wore masks Tuesday in an attempt to protect themselves form severe acute respiratory syndrome, or SARS.
The greatest financial impact, so far, has been felt in Hong Kong and Singapore, where the incidence of infection is highest. But financial analysts are also keeping an eye out for signs of the disease's spread in mainland China, South Korea and Vietnam.
"The outbreak of SARS is significant enough to affect growth across the region," said Merrill Lynch economist T.J. Bond.
Bond and other financial experts last week lowered their 2003 economic growth forecasts for East Asia, which excludes Japan, by 0.6 percent. Those predictions assume the spread of SARS will be under control by early summer, a hopeful scenario given the current environment of fear and ignorance surrounding the illness.
Motorola and Hewlett Packard briefly closed factories in Singapore and Hong Kong, respectively, to disinfect them after workers showed symptoms. Intel canceled a trade show in Taiwan and General Motors scrapped plans to have journalists tour its operations in South Korea.
Several major banks shut down branches near Hong Kong's Amoy Gardens, an apartment complex where the government imposed a 10-day quarantine Monday after reporting about 200 cases of the disease.
Such outbreaks have led many companies, including U.S.-based Eastman Kodak and Finland-based Nokia, to restrict travel to Asia. Others, such as Samsung Electronics and LG Electronics, have asked families of employees working in Hong Kong to return to South Korea.
Standard Chartered, Hong Kong's fourth largest bank, told employees to avoid face-to-face meetings, and teleconferencing and other technologies have helped ease the crisis. "We're using virtual or online reporting for most offices," said Mary V. Lam, a spokeswoman for Motorola Asia Pacific.
Still, the alarm caused by the deadly flu-like illness has had a devastating effect on Asian tourism, causing airline and hotel bookings to drop sharply. Many carriers have reduced service to the region and future bookings remain weak as business fliers postpone trips and leisure travelers explore other options.
Canadian businesses are increasingly feeling the crunch, too, as the country's financial center, Toronto, grapples with a growing number of cases of the illness. Hospitals there are packed treating those who may have contracted SARS and elective surgeries have been halted. Air Canada filed for bankruptcy earlier in the week and mentioned the SARS epidemic as a drain on its business.
With the exception of airlines such as Northwest and United, U.S.-based corporations with operations in Asia are at relatively little financial risk, for the time being. But even the slightest negative news becomes magnified at a time when the global economy is already dealing with the effects of war, terrorism fears and high oil prices.
"This would have gotten a whole lot more attention had the war in Iraq not been happening," said Sherry Cooper, chief global economic strategist for BMO Financial Group.
That said, Cooper believes a decisive victory in Iraq by U.S.-led forces would deliver a rush of exuberance to worldwide financial markets, overshadowing any lingering impact caused by the mysterious illness.
While the overall impact on gross domestic product in the region may be less than 1 percent in 2003, revenue for Asian airlines, hotels and the rest of the tourism industry could drop between 15 percent and 30 percent for the year, economists said.
Those estimates assume that the spread of the virus will not be a serious issue three months from now — a position that financial analysts concede was somewhat optimistic.
"We have relied on medical experts in the field for this scenario," said Andy Xie, an economist at Morgan Stanley.
Xie said his biggest worry is the further spread of SARS across mainland China, where the government was slow in identifying the illness and in notifying world health officials.
