SARS hits economic pressure points

/ Source: CNBC

As the deadly SARS virus continues to spread, so does the impact on the world’s economic pressure points. The global trading center of Hong Kong, the manufacturing powerhouse of southern China and the Canadian financial capital of Toronto are now all areas that the World Health Organization says travelers should avoid if at all possible.

“CASES ARE BEING exported from both China and Toronto to other countries and establishing disease centers in other countries,” said David Heymann of the World Health Organization.

Canada’s central bank governor is already predicting SARS, severe acute respiratory syndrome, will slow the country’s economic growth in the second quarter, although it’s too soon to say by how much.

Meanwhile, economists at Citigroup have sharply lowered their growth forecasts for China, Hong Kong and Singapore, warning that SARS threatens to slow economic growth in Indonesia, Malaysia and the Philippines.

Despite a budget deficit, Hong Kong is taking steps to help businesses who’ve been hurt by the disease.

“We will set up a $3.5 billion loan guarantee scheme for industries badly hit by the disease,” says Hong Kong chief executive Tung Chee-Hwa.

The widespread cancellation of business and leisure travel has already devastated Asian airlines, and Boeing chief executive Phil Condit has told Wall Street that he doesn’t know when the airline industry will recover.

According to one estimate, half off all the electronic components made in Asia come to America on passenger jets, and that’s causing headaches for hundreds of tech firms.

“It could lead to downsizing and job losses if this continues because it slows down, it freezes what’s going on in companies when they can’t get their work out,” says John Challenger of Challenger, Gray and Christmas.

For Eastman Kodak, fewer Chinese vacationers during the traditional holiday period in the first week of May means fewer snapshots and lower film sales to the region.

Companies ranging from Tupperware to software giant PeopleSoft are blaming SARS for slower than expected first quarter sales.

“Really what’s most important is not SARS itself, but the fear of SARS,” says Robert Ginis of Barclays Global Investors. “If the epidemic is ... constrained or a cure is found soon, it’s not likely to have a huge impact.”

But as the number of SARS cases grows, so does the mystery surrounding the disease. Canadian health officials say the Toronto cases do not appear to be linked to the strain of corona virus which has shown up in other infected patients. And that could make finding a cure for this disease all the more difficult.