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SARS could cost Asia $28 B
Monday, 12 May 2003, 19:30 IST
SINGAPORE: The outbreak of SARS will reduce economic growth in Asia this year, translating into huge losses in income and output, reports UPI.
The Asian Development Bank (ADB) estimated Friday those losses would range from $12 billion to $27.7 billion for East and Southeast Asia should SARS extend into the third quarter of 2003.
In a report on the economic implications of SARS, the ADB estimated that if the epidemic lasted only one quarter it was likely to shave off 0.3 percentage points of growth in East Asia, down to 5.3 percent; and 0.6 percentage points off growth in South East Asia, down to 3.4 percent.
But if the outbreak last over two quarters, it would likely take off 0.9 percentage points off growth in East Asia, down to 4.7 percent, and 2.5 percentage point off growth in South East Asia, down to 2.5 percent.
China gross domestic product growth would be moderately affected, remaining unchanged at 7.3 percent if SARS only last one quarter and falling to 7 percent if it last two quarter.
But GDP growth in Hong Kong could fall from a projected 2 percent to 0.8 percent if SARS lasts one quarter and to a 1.4 percent contraction if it was around for two quarters.
In Singapore, Growth could fall form a predicted 2.3 percent to 1.9 percent on the scenario of only one quarter of SARS and 0.7 percent on a scenario of two quarters.
In the short term, SARS mainly affects economic growth by reducing demand, with a dramatic decline in consumer confidence, and falls in service exports, in particular tourism-related exports, the report noted.
Investment is also affected by reduced overall demand, heightened uncertainties and increased risks. Foreign investment inflow may be delayed or reduced in reaction to SARS.
While increased government spending will mitigate the impact, the ability of governments to revive economies facing widespread reductions in private spending is limited.
The weakening of demand will further reduce inflation and intensify deflationary pressure in some economies, including China, Hong Kong and Taiwan.
But one factor that might offset this impact is the rebound of private spending when SARS is brought under control, the ADB said.
Consumers may compensate for their reduction in consumption by subsequently increasing their spending. While domestic consumption could quickly change once confidence resumes, it may take a longer period for foreign travellers and investors to return.
While SARS has caused serious disruption to short-term economic growth, its long-term effects largely depends on whether governments can speedily implement effective public health policies.
Given the externalities related to contagious diseases, governments need to play a major role in preventing and containing diseases, and in generating research outcomes to facilitate rapid and effective diagnosis and treatment, ADB said.
Source: IANS
Source: IANS