Scary headlines about a new viral outbreak. People peering nervously over their surgical masks while on public transport. Colleagues and friends refusing to shake hands. Ask anyone who was in Hong Kong in early 2003, and they may recall these as some of their most vivid memories of that period.
The Chinese territory was suffering through an outbreak of what came to be called Severe Acute Respiratory Syndrome (SARS). And with another deadly virus now emerging from mainland China, many people in the Asia Pacific region are reliving those worrying times.
So, it is little surprise that economists are also drawing parallels between the economic damage that SARS caused 17 years ago and what could happen now. And Hong Kong is once again near the epicentre of the outbreak while its economy is on the ropes.
“The outbreak of a SARS-like coronavirus in (the central Chinese city of) Wuhan is developing into a major potential economic risk to the Asia Pacific region now that there is medical evidence of human-to-human transmission,” Rajiv Biswas, Asia Pacific chief economist at research firm IHS Markit, told Al Jazeera.
But a closer look at the economic fallout of SARS reveals a potential silver lining to the current outbreak: The region bounced back fairly quickly from the 2003 outbreak.
Since reports of a cluster of viral pneumonia cases in Wuhan first emerged around the start of this year, the numbers of reported infections and deaths has grown steadily.
Chinese authorities say the virus can be spread by human contact. And with the busiest time of year for travel in many parts of Asia just days away when the Lunar New Year celebrations begin – when millions of people in China and elsewhere board trains, planes and buses to visit their families – the potential for it to spread rapidly is worrying health authorities.
And that has also spooked financial markets.
On Tuesday, Hong Kong’s main share index fell 2.8 percent, its biggest one-day drop since early August. Shanghai’s benchmark stock index lost 1.7 percent, with airline companies hit particularly hard. But shares of drugmakers soared as investors bet their sales will rise as demand for prescription drugs increases as the virus spreads.
“I’m no doctor, but I do think I understand human nature well enough to realise the potential for another economic hit to growth from this source,” said Robert Carnell, chief economist for the Asia Pacific at Dutch bank ING, in a research note.
At least one analyst says investors should expect share prices to fall even further.
“Markets have priced too little in, in terms of the spreading of this virus across multiple Asian cities from Wuhan and millions of travellers across China for [Chinese New Year] is likely to worsen the situation,” Margaret Yang, an analyst at CMC Markets in Singapore, said in an emailed note.
“Information asymmetry underscores the possibility that official figures of the number of patients might have been under-reported for social stability reasons,” Yang said.
Back in 2003, over a period of a few months, more than 8,000 people fell ill because of the SARS virus, mainly across Asia, with some cases reported as far away as Europe and the United States, killing more than 770 people in total, according to data compiled by the World Health Organization.
As people stopped going to restaurants and shops, and curtailed their travel plans, industries such as leisure, tourism and transport across Asia suffered.
The Asian Development Bank estimates that the region’s worst-affected economies – mainland China, Hong Kong, Singapore and Taiwan – experienced economic losses totalling $13bn, shaving between half and a whole percentage point off the region’s gross domestic product.
But the region bounced back pretty swiftly.
“These losses, however, did not affect any of these economies for more than a couple of quarters, and even the most heavily affected countries started recovering by [the third quarter of] 2003,” the bank says in a report published in October on the economic impact of SARS.
Hong Kong’s open, service-oriented economy, however, suffered more than most places in Asia.
Its gross domestic product – the main measure of size of an economy – shrank by 0.5 percent in the second quarter, before recovering over the next two quarters and growing by 3.1 percent for 2003 as a whole.
But there are some big differences between the state of Hong Kong’s economy then, and now.
In 2003, its main trading partner – mainland China – was growing at an annual pace of about 10 percent. In fact, part of Hong Kong’s economic policy response to the SARS epidemic was to open itself up further to mainland China to take advantage of growth across the border. One example: It started allowing individual mainland Chinese tourists to visit the territory, rather than confining them to tour groups.
But today, the mainland’s annual growth rate is about six percent, its slowest pace in nearly 30 years . China’s trade war with the US has affected not only the mainland, but Hong Kong as well, with its heavy reliance on its role as an important transshipment hub between mainland China and the rest of the world.
And Hong Kong was already in a recession before the latest viral outbreak, its economy pummelled by months of violent anti-government protests triggered by anger at a now-withdrawn bill that would have allowed for suspects to be extradited to the mainland.
SARS and the latest viral outbreak seem to share a common trait: They appear to affect people who have already been weakened by either old age or other conditions.
With that in mind, the prognosis for Hong Kong’s ailing economy for the months ahead – as it suffers under the perfect storm of a plunge in tourist arrivals due to protests and now a viral outbreak, combined with the effects of the US-China trade war – could spell yet more pain.