THE SARS OUTBREAK: There Will Be No Peace Dividend for Defeating This Enemy ; GLOBAL ECONOMY

By Mcrae, Hamish | The Independent (London, England), April 25, 2003 | Go to article overview
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THE SARS OUTBREAK: There Will Be No Peace Dividend for Defeating This Enemy ; GLOBAL ECONOMY


Mcrae, Hamish, The Independent (London, England)


IT LOOKS increasingly - and alarmingly - as though Sars may deal a bigger blow to the world economy than the Iraq war. Until recently, the disease was only seriously affecting one set of industries, travel and tourism, and one region of the world, East Asia. But now the spread to Canada and, in particular, the World Health Organisation warning about travel to Toronto, raises the possibility of Sars having a true global impact.

And unlike the shock of the Iraq war, where there is now the probability of lower oil prices, this is a shock that can have no pluses, only minuses.

The situation so far is that whatever happens now there will be some significant negative impact on world growth this year. Even if the outbreak is contained, and seen to be contained, in the next few weeks some output has been lost that can never be recovered.

The travel and tourist business is huge: defined widely, it accounts for about 11 per cent of world output. At the moment, air travel in much of East Asia is down by some 30 per cent. In the city most severely hit, there are reports of hotels with 10 per cent occupancy.

This is very serious for two reasons. First, the output of the travel industry cannot be stockpiled. A computer or a fridge that is unsold can be put into a warehouse and sold later, but an airline seat or a hotel bed that is unsold is lost forever. Second, these are industries that have already been weakened by the 11 September attacks and their aftermath in Afghanistan and Iraq. They are particularly vulnerable.

In addition, the region most affected is the one that, up to now, has been the main engine of growth. East Asia has been the fastest- growing part of the world. Canada, the only Group of Seven developed country to be affected so far, happens to be the fastest-growing member of the G7.

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