Wed, May 21, 2003 - Page 10 News List

SARS impact may be long-term

GDP FEARS Business leaders warned that this year's economic growth could be severely disrupted by the disease -- more than the government has forecasted

By Joyce Huang  /  STAFF REPORTER

A man puts on his face mask and has his temperature taken at Taipei's Lung Shan Temple yesterday as part of the nationwide efforts to halt the spread of SARS.

PHOTO: REUTERS

Business leaders yesterday urged high-ranking government officials not to underestimate economic shock of the SARS epidemic and "prepare for the worst."

"The government should set up a medium to long-term mechanism to deal with the disease should the SARS relapse in the winter," said Nelson Chang (張安平), vice chairman of Chia Hsin Cement Corp (嘉新水泥), in response to Minister of Economic Affairs Lin Yi-fu's (林義夫) estimates of this year's economic growth at a business luncheon yesterday.

Lin reiterated the government's economic forecast yesterday, saying that this year's GDP may decline by 0.5 to 0.8 percent if SARS is successfully contained by next month.

However, if the disease continues to effect the economy in the third quarter, this year's GDP may drop another 1.3 percent to 1.5 percent to hit only 2 percent, he said.

Last Friday the Directorate General of Budget, Accounting and Statistics revised this year's GDP prediction downward from the 3.68 percent it predicted in February to 2.89 percent.

Although exports grew by 5.6 percent and imports by 7 percent last month, Lin said that "the growth of exports is likely to turn negative in May."

Douglas Hsu (徐旭東), chairman of Far Eastern Group, also warned the government of deflation, saying its negative impact on the economy could go "beyond imagination."

"If consumption is not boosted soon, Taiwan may go into deflation, which will serious damage the economy," Hsu said.

He urged the government to adopt fiscal policies to boost consumption, including tax-cuts.

Former economics minister Wang Chih-kang (王志剛) said that the SARS outbreak has tarnished the nation's international image and brought about social disorder, both of which will harm long-term economic development.

Huang Mao-hsiung (黃茂雄), chairman of the Chinese National Association of Industry and Commerce (工商協進會), who hosted yesterday's luncheon, urged the public to have confidence in the government's anti-SARS measures.

But he went on to say that "some small-sized hospitals, travel agencies and department stores may not survive the economic plight triggered by SARS."

A Hong Kong-based economist at Morgan Stanley & Co, Andy Xie (謝國忠), said SARS has a greater-than-expected shock on society although its impact on the economy remains a short-term phenomenon.

"The disease has brought about much institutional weakness among Asian countries that need to be addressed soon," Xie said.

The institutional weakness includes reduced national tax revenues, the lack of national-level contingency plans to deal with the epidemic and lower investments in the health-care system.

Following the widening of the SARS outbreak here late last month, Morgan Stanley yesterday revised its GDP forecast for Taiwan -- downward.

GDP is like to grow only 2 percent, down from 2.3 percent projected previously, Xie said.

The disease is expected to slow down the nation's China-bound investments, but the US investment bank believes that a continuous open policy and improvement in China's administrative efficiency and financial structure will, in the long run, offset the short-term impact of SARS, Morgan Stanley said in a report.

Goldman Sachs also cut Tai-wan's GDP to 3.3 percent to its earlier forecast of 3.9 percent yesterday, without taking the recent SARS surge into consideration.

Goldman Sachs said that it may further revise downward the nation's GDP figure in a week.

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