Experts Warn Against SARS' Psychological Impact on Asian Economy

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Last updated at: (Beijing Time) Wednesday, May 14, 2003

Experts Warn Against SARS' Psychological Impact on Asian Economy

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Asian countries should fight the fear caused by severe acute respiratory syndrome (SARS), which could bring negative impact to economic development, experts said in Beijing Tuesday at a forum called "SARS and Asia's Economy -- Impacts and Policy Recommendations".

Agreeing on the temporary influence of SARS, economists participating were greatly concerned about handling economic development while overcoming the fear of SARS. They also called for concrete measures to eliminate any overreaction among the public.

Chino Tadao, president of the Asian Development Bank (ADB), said the bank's ongoing research on SARS' influence on Asia foundthat its impact not only covered social and economic sectors, but also posed great psychological problems among the public.

This in turn brings a negative influence on certain economic fields, such as tourism, transportation, entertainment, retail and food services, Chino Tadao said.

Hu Angang, director of the Center for China Study of Tsinghua University, said the former panic among Beijing residents was due to inadequate knowledge and information on SARS. But an investigation May 5 showed Beijing residents were becoming more calm and optimistic.

Hu emphasized SARS' affect on China as a big economy is not an economic crisis but a psychological tension that has brought about economic loss. Currently, China should go all out to remove or abate the SARS fear so as to ensure the safety and health of the citizens.

ADB chief economist Ifzal Ali said SARS has created a disproportionately large psychological impact on people in relation to its relatively low death rate. Among the reported SARS cases, the mortality rate has been seven percent and the recovery rate is 43 percent.

Rapid transmission of sometimes incorrect information about SARS and lack of sufficient medical information led to the extreme psychological fear, he said. Medical risk gave rise to uncertaintyand a degree of overreaction in some cases, which is impacting negatively some Asian economies.

Ali pointed out the experience in a few SARS-affected countries showed there are a number of channels by which the SARS outbreak could affect an economy. In locations with a high incidence of SARS, the movement of people is restricted, thus reducing consumer spending.

Tourism-related service sectors, including airlines, hotels, entertainment, retail and restaurant business, are particularly affected, Ali noted. Exports will also be affected as trade fairs and business travels are canceled and demand for goods from affected areas fall, and the persistence of the outbreak could dampen investor confidence, resulting in weaker investment and inflow of foreign capital.

The supply side will also have shocks, Ali said, and the work force will be reduced due to the disease, affecting both the service sector and manufacturing. Delays in international shipments of parts and final goods may also hamper cross-border trade, aggravating the supply-side shocks.

Ong Keng Yong, secretary-general of the Association of Southeast Asian Nations (ASEAN), addressed the forum in a letter that an atmosphere of panic can be felt everywhere in the world, which has led to economic loss in each country.

Asian countries should strengthen their communication to let the public have full access to knowledge about SARS.

Economists: SARS to Impose Only "Brief" Impact on China's Economy

The outbreak of severe acute respiratory syndrome (SARS) will only impose a brief impact on China's economy, agreed economists at a forum on "SARS and Asia's Economy: Impacts and Policy Recommendations" that began in Beijing Tuesday.

China will contain the spread of SARS in a short period with its current efforts and achievements, and the depressed consumption and investment of the most seriously affected service industry will be soon eased once the epidemic is under control.

This will in turn promote economic growth, said the economists.

Homi Kharas, chief economist of East Asia for the World Bank, said China can transfer the SARS effects into a temporary impact through international cooperation.

He said some positive phenomena occurred in China's economy even while SARS spreads in the country, including an improved international environment, rapidly growing exports, a stable cash market and a rapidly growing GDP in the first quarter.

Chen Xingdong, chief economist of BNP Paribas Peregrine Securities Ltd., concluded that, after analyzing the monthly performance of seven major industries in China, SARS will affect China's economy most seriously in the third quarter but the economy will rebound strongly in the fourth quarter.

He predicted China's GDP will grow at least seven percent in 2003 and maintain a rapid growth in 2004.

Chinese economist Hu Angang was also optimistic about China's economy after the SARS crisis. He predicted China's GDP growth rate will be eight to nine percent in 2003, and that of Beijing, the most seriously affected region, will be 10 percent.

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