SARS threatens Asia tourism
By Paul Wiseman
USA Today
HONG KONG — Flights are grounded, hotels empty and tourists scarce in the luxury shops of the neon-lit Tsim Sha Tsui district here and on Singapore's fashionable Orchard Road.
The outbreak of a mysterious illness — severe acute respiratory syndrome (SARS) — poses the biggest economic threat to East Asia since the 1997-98 financial crisis. For businesses that depend on tourism, "the immediate effects are probably more severe," says Sally DeSouza, spokeswoman at the Mandarin Oriental Hotel in Hong Kong.
The outbreak apparently began last fall in southern China's Guangdong pro-vince and spread to Hong Kong, Vietnam, Singapore and beyond. The illness, a form of pneumonia, has infected about 3,000 people globally and killed at least 133, mostly in Asia.
The economic damage comes not so much from the illness as from the panic it's causing as Asians don surgical masks, avoid public places and trade rumors via e-mail. "The odds of getting SARS are slightly higher than getting hit by a meteorite, but not much," says David O'Rear, chief economist for the Hong Kong General Chamber of Commerce.
But the economic damage is real: Travelers are canceling trips to East Asia, business groups are calling off conferences, and Malaysia has closed its borders to most travelers from the most infected countries.
Economists are downgrading forecasts for regional economies. Morgan Stanley has cut its expectations for 2003 economic growth across the region (excluding Japan) to 4.5 percent from 5.1 percent, citing an expected 60 percent drop in tourism the second quarter. Kenneth Rogoff, International Monetary Fund chief economist, says that while emerging Asia is growing faster than any other part of the world — predicted at 6 percent this year — SARS could knock a quarter of a percentage point off that if the epidemic lasts for a quarter.
Economic damage is likely to be the worst in:
• Hong Kong. The former British colony has struggled to contain the outbreak and is still reporting double-digit daily increases in SARS cases. At least 1,150 have been infected and 40 have died in Hong Kong.
Tourism was crippled earlier this month when the World Health Organization issued a rare warning for travelers to avoid Hong Kong and Guangdong Province. The number of travelers arriving in Hong Kong dropped 10 percent the last 16 days of March, ruining what had been shaping up to be a pretty good month, the Hong Kong Tourism Board reported.
It's expected to get worse. Cathay Pacific, Hong Kong's flagship airline, has slashed more than a third of flights because of weakening demand. Some hotels reportedly are 90 percent empty. "Tourism is easily affected by fear. People who are planning their vacations find it easier to shift direction than to shift time," O'Rear says. "You can never make up lost tourism."
Hong Kong's watch and jewelry makers were dealt an unexpected blow when the Swiss government banned them from attending an April trade show in Zurich. The Hong Kong government says it's seeking compensation from Switzerland.
The government has admitted that its forecast of 3 percent economic growth this year is doomed. It is working on a lower forecast. Private economists haven't waited: Morgan Stanley slashed its forecast to 2.1 percent from 2.7 percent; Hong Kong's Dao Heng Bank cut its to 1.2 percent from 1.8 percent. "In the second quarter, we will face a nasty decline in economic activity," says Dao Heng senior economist Daniel Chan.
• Singapore. The activist government moved quickly to deal with the outbreak, closing schools and issuing warnings. But the city state has been shocked by reports that a single Singaporean woman — one of a handful of so-called superspreaders — infected more than 100 people.
Singaporeans have heeded the government warnings so zealously that shops are empty. "The message is: Don't go out and socialize too much. As a result, the shopping centers are quiet," says Jannie Tay, president of the Singapore Retailers Association.
