Asia crisis
Thursday, 04 03, 2003
HONG KONG — Some Asian economies are facing one of their biggest challenges since the 1997/1998 financial crisis — a killer virus that is spreading around the world, keeping tourists away and shoppers at home.
The deadly outbreak is casting a dark cloud over Asian economies, with growth rates this year likely to be slashed by up to 1.5 percentage points, an investment bank said.
The biggest growth forecast cut is for Singapore, which is heavily reliant on tourism. Growth this year is now seen at 2.5 percent, down from 4 percent.
Hong Kong's expected growth has been cut to 0.9 percent from 1.5 percent, Taiwan to 3.9 percent from 4.3 percent and Malaysia to 4 percent from 4.7 percent.
Elsewhere in Southeast Asia, Thailand's growth is seen easing to 3.5 percent from 4 percent forecast earlier, Indonesia is seen falling to 3.9 percent from 4.3 percent and the Philippines is is estimated at 3 percent, down from 3.5 percent.
BNP Paribas Peregrine is maintaining its 7.4-percent growth forecast for China, which is less dependent on tourism, but said the estimate could be cut by 0.2 to 1 percentage points if the situation worsens.
“The damage is incalculable,” says Manus Pipatananan, President of the Thai Travel Agents Association which groups over 500 outbound tour operators.
“I would say 98 percent of all outbound tour bookings for the peak month of April have been cancelled,” Manus said.
Tourism revenues contributed about 6.1 percent of Thailand's gross domestic product last year.
The Thai Farmers Research Centre has estimated the war in Iraq and the viral outbreak could knock about half a percentage point off GDP growth this year.
Investment house Morgan Stanley said on Wednesday it has reduced its 2003 economic forecast for East Asia excluding Japan to 4.5 percent from 5.1 percent due to the viral outbreak.
The virus, which causes Severe Acute Respiratory Syndrome (SARS), has claimed at least 75 lives worldwide over the last two weeks, with mainland China reporting 46 deaths and 16 fatalities in Hong Kong. More than 2,000 people have been infected around the world as airline passengers spread the disease.
The World Health Organisation warned travellers on Wednesday to postpone visits to Hong Kong and Guangdong province in southern China where SARS is thought to have originated.
“We assume a 15 percent decline in this year's tourism revenue. If SARS lasts for two quarters, our estimate of GDP impact doubles,” said Andy Xie, chief economist for Asia-Pacific at Morgan Stanley in a research note.
Xie said the current health crisis was the “gravest” economic problem to hit Asia since regional financial turmoil in 1997/1998.
“The virus is killing my business,” said Hoang Anh Tuan, director of ATC Travel in Hanoi, adding that ATC has lost several hundred tour bookings from European tour agencies.
Goldman Sachs said it was lowering its growth forecast for Hong Kong's real gross domestic product to 1.7 percent for 2003 from an original estimate of three percent. Goldman said it expects tourism expenditures to drop 65 percent, while locals are seen spending about 20 percent less.
Global ratings agency Standard & Poor's said the virus might hurt Hong Kong's economic growth and the government's revenue collections. S&P had said on Tuesday it saw no immediate impact on Hong Kong's ratings yet.
Restaurants and gymnasiums in central Hong Kong, which are typically packed on weekday evenings, have been empty and most commuters in Hong Kong's crowded subway trains and buses have taken to wearing surgical face masks.
Tourism, which accounts for about six percent of Hong Kong's gross domestic product and has been one of the best performing sectors, has been the single hardest hit sector of the economy since the outbreak began.
But the territory's exports of goods and services, which together actually exceed Hong Kong's GDP in value terms, may also be adversely affected as promotional efforts get scotched.
Switzerland is barring Hong Kong exhibitors from a global jewellery and watch trade fair, citing concerns over the virus. Watches and jewellery are among the few items that are still made domestically in Hong Kong.
AFP and Reuters
