Ratings agency Standard & Poor's said yesterday that the outbreak of a deadly flu-like illness was likely to cause more damage to China's economy than the war in Iraq.
The short-term impact of severe acute respiratory syndrome, or SARS, would likely be limited to certain companies, such as travel-related businesses and restaurants, that face a sharp downturn in revenues, said Paul Coughlin, managing director of the Standard & Poor's corporate and government ratings group in Asia.
PHOTO: AFP
The agency's estimate for likely damage was based mainly on SARS-related declines in travel, tourism and consumption, said analyst Renee Lam. She could not immediately provide any figures.
Standard & Poor's said it was not considering any immediate changes in its corporate credit ratings, but planned to review selected companies in greater China, which includes Hong Kong and Taiwan, over the next few months.
Coughlin said Standard & Poor's considered the direct impact of SARS, which has killed at least 108 people worldwide and sickened some 2,700, to be low for most companies.
Chinese economists quoted in the state-run media have said they anticipated losses of as much as US$4 billion from the war, due to disruptions in trade. Higher oil prices have also driven up operating costs for manufacturers.
Much of the Standard & Poor's assessment focused on Hong Kong, whose already ailing economy has suffered a more severe blow than the mainland from the sudden drop in tourism and business travel and plummeting local consumption.
Tourist bookings have dropped by 80 percent and restaurant and retail revenues have plunged by half, it said.
Hong Kong Finance Secretary Antony Leung told lawmakers Wednesday that the territory was unlikely to manage to meet its economic growth target of 3 percent this year. Hong Kong has pledged measures to alleviate financial difficulties faced by various industries affected by the SARS outbreak, but details have not yet been released.
A number of economists have revised downward their economic growth forecasts for both mainland China and Hong Kong, and some say they expect this city of 6.8 million to slump into recession.
Mainland officials have tried to play down the impact of SARS, while reassuring tourists and residents that medical authorities have brought the outbreak, thought to have originated in the southern province of Guangdong, under control. Although many companies and groups have canceled plans for travel to and events in China and other SARS-affected regions, Beijing intends for now to go ahead with its annual Boao Forum, a business and political gathering scheduled for mid-May on the southern island of Hainan.
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