SARS could hurt GDP: economists

The nation's economic growth rate for this year may decline by up to 1.56 percentage points if the government fails to contain the spread of severe acute respiratory syndrome (SARS) in the first half of the year, an economic research group said yesterday.

"If the disease lingers on for a period of six months and isn't contained until mid-September, we may see a GDP rate of 1.98 percent this year," said Yu Min-chun (尤敏君), a researcher at the Taiwan Institute of Economic Research (TIER, 台經院).

She made the comments while presenting TIER's post-SARS economic forecast to a meeting of the Council of Economic Planning and Development in Taipei yesterday afternoon.

TIER previously estimated this year's GDP would hit 3.54 percent.

Presenting its forecast at the same meeting, the Chung-Hua Institution for Economic Research (CIER, 中經院), also cut this year's GDP on SARS fears by 0.8 percent to 2.71 percent. That is down from a previous estimate of 3.51 percent, according to Chou Ji (周濟), director of CIER's Center for Economic Forecasting.

Both institutes, however, failed to calculate into the estimate the China factor, only saying that the local economy may be negatively impacted by Beijing's failure to quickly arrest the spread of SARS and boost China's economy.

"If the Chinese economy deteriorates, so does Taiwan's, since China has become the nation's second largest export market," TIER president Wu Rong-I (吳榮義) said yesterday morning at a press conference.

Wu said China-based Taiwan-ese businesses may be even more vulnerable if they fail to adapt themselves quickly to the economic fallout there.

However, both Wu and Chou said that Taiwan may also benefit from the crisis in China.

"While the possible outflow of [export] orders from China is not clear now," Chou said. "If the orders are sent to Taiwan, our economy may actually benefit."

Wu also said that Taiwanese companies may begin to ponder the growing risks of doing business in China and divert part of their China-bound investments back to Taiwan.

If SARS is quickly contained by the end of June, Wu said that this year's GDP may be cut by only 0.57 percent to 3.02 percent.

"A total of NT$5.7 billion will be incurred in economic losses across all sectors including the manufacturing and service sectors," he said.

Wu Chung-shu (吳中書), a research fellow at Academia Sinica's Institute of Economics, agreed, saying the country may suffer a 0.58 percentage GDP cut if the disease doesn't stymie the third and fourth quarters' performance.

He warned that "it'll be difficult for Taiwan to maintain 3 percent economic growth this year," adding that "the local economy may slip into recession if the disease lasts more than two quarters."

Taking a more optimistic view, Chou said that the GDP may hold at 3.27 percent if the disease is contained by the end of June.