Cpolice wristbandsOVID-19 may do more damage to economies than SARS, experts say

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A panoramic view of the financial area in Hong Kong. [Photo/Xinhua]

The novel coronavirus now rampaging across China could be much more damaging to regional economies than the similar SARS was in 2003, experts warned on Tuesday. And Hong Kong stands as one of the regions that the epidemic could have a chilling effect on, they said.

"China"s economy will brace for a painful blow, much worse that what it suffered during SARS," said Wang Tao, chief economist at UBS Investment Bank, in a teleconference on Tuesday.

The research house lowered its whole-year growth forecast for the Chinese economy to 5.4 percent, down from 6 percent.

The forecast, however, is based on a "highly dubious" assumption that the new coronavirus will peak by the end of March, and production activities will gradually normalize in the second quarter.

"The scale of the impact will ultimately be determined by how the virus spreads and evolves and how effective the supportive policies could be, which is almost impossible to predict," Wang said. "The real GDP growth is likely to be even worse, as many companies still face uncertain prospects of restarting business in the coming months."

What makes the outbreak much more dangerous is the dramatic changes that have taken place since 2003 both inside and outside China. At home, the once-highflying property market remains on pace to cool down; manufacturing businesses are stuck in low gear; and the domestic economy has been hampered by the trade dispute with the United States, Wang said.

Externally, China"s economy now makes up 16 percent of world GDP, while back in 2003 it accounted for only about 4 percent of global output. In addition, globalization since 2003 has encouraged companies to build supply chains that cut across national borders, making economies much more interconnected.

Wang said he believes that Hong Kong, together with Singapore, Taiwan, Thailand and South Korea, stand to feel the ripple effect from the outbreak. One of the major channels that send a chill through the neighboring areas is tourism.

"Since 2003, regional small and open economies such as Hong Kong, Thailand, South Korea and Taiwan have received more tourists from the Chinese mainland, who now account for almost 80 percent of total visitor arrivals to Hong Kong, and 30 percent to Thailand and South Korea," said Aidan Yao, senior emerging Asia economist at AXA Investment Managers.

Hong Kong"s fragile economy, which has already been weighed down by the double whammy of the Sino-US trade battles and months-long violent protests in the city, could brace for a negative growth of 1.8 percent for the whole year in the aftermath of a negative growth of 6 percent over the first quarter, Wang said.

"Although there is scope for policy response when there is a need, the policy space is generally more limited now than in 2003. At a time when Asia is already struggling to recover from the soft patch last year, a vicious epidemic could be the last straw that tips the economies into a more pernicious downturn in 2020," Yao warned.

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