While SARS infections have ebbed across east Asia, the economic consequences will continue to be felt for months to come, according to business executives and economists.
Tourism is proving very slow to recover across the region. Retail sales have only begun to rebound, leaving stores reluctant to order more from factories because they are still stuck with huge inventories of goods that went unsold at the height of fears over SARS.
The effects of the continued sluggishness are being felt well beyond Hong Kong. Electronics manufacturers complain that the development of new consumer products has been badly delayed because companies barred engineers from traveling to the US, Taiwan and China after the SARS outbreak.
That means stores around the world will have fewer innovative computer printers, scanners and wireless network devices on the shelves next Christmas, said Frank Huang (
"There will be, because of SARS, a reduced number of products on the market, that is sure," during the crucial Christmas selling season, said Huang, who is also the chairman of Power Chip, one of Taiwan's largest makers of computer chips. The development of new computers has been less affected than the development of computer peripherals like printers, he added.
Yet some encouraging signs remain for Asian economies. Exports are still strong, especially from China and especially to Europe, as the rising euro has improved the competitiveness of Asian goods. Most Asian currencies are formally or informally pegged to the sinking US dollar, making Asian products less expensive in Asian markets.
And the number of new cases of SARS is down sharply from the levels of two months ago. China and Taiwan each reported seven new cases of SARS on Friday, while Hong Kong had four new cases.
The strong divergence between slow domestic demand and brisk exports has made it especially difficult for economists to gauge economic output. Sometimes misleading statistics from image-conscious governments have made matters worse.
China's government-controlled news media, for example, recently said that economic output in China was 8.9 percent higher in April than a year earlier. But investment bank economists say that this figure just shows that the Chinese economy expanded very fast in the third and fourth quarters of last year and the first quarter of this year.
Comparing economic output in the second quarter of this year to output in the first quarter, estimates range from Morgan Stanley's prediction of zero growth to J.P. Morgan's assessment of minus 2 percent. Most economists expect growth in China to resume in the third quarter, but not until the fourth quarter is the Chinese economy expected to resume the 7 to 10 percent growth that it enjoyed until this spring.
On Thursday, Hong Kong's government cut in half its estimate of economic growth this year, to 1.5 percent, with most of that growth having occurred in January, February and early March, before the SARS outbreak started in mid-March and crippled demand.
"The economy was actually doing very well until we hit SARS," said Antony Leung, Hong Kong's financial secretary. Even before SARS, however, Hong Kong was suffering from severe deflation, and Leung predicted on Friday that because of SARS, the general price level here will drop 2.5 percent this year, instead of the 1.5 percent previously forecast by the government.
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