Fears over economic fallout mount

Investors cautious as US says too early to assess full impact of outbreak.

    Investors will be hoping the flu outbreak does not "infect" the markets [Reuters]

    David Kotok of Cumberland Advisers said he expected "the flu to be a negative shock that comes on top of an already-weakened economic and financial system", while Ryan Larson, a senior equity trader at Voyageur Asset Management, called the flu a "wild card" for the market.

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    "It's still a little bit early to go into panic mode, but it's definitely something that needs to be watched closely," he said.

    Despite declaring a public health emergency and together with the EU, urging people against "non-essential" travel to Mexico, the US government echoed sentiments on Monday that it was too soon to determine the potential economic impact of the outbreak.

    Sars lessons

    But fallout from the deadly Severe Acute Respiratory Syndrome (Sars) epidemic in 2003 could be indicative of the potential economic cost if the swine flu becomes a full blown pandemic.

    The most visible impact of Sars was on tourism and consumption patterns in the most affected countries - China, Hong Kong, Singapore and Malaysia - although others in the region also suffered.

    Data from the Asian Development Bank showed tourist arrivals dropped by up to 70 per cent at the height of the crisis in the most affected economies, leading to estimated tourism revenue losses of nearly $15bn.

    With several countries already issuing travel advisories for Mexico, the health crisis could badly hurt the country's tourism sector that brought in $13.3bn in 2008.

    And with the authorities in Mexico City urging residents to stay home, shopping malls have been left deserted.

    Already in its worst recession since a devastating financial crisis in the 1990s, economists say the swine flu epidemic could shave another half percentage point of growth off an economy already set to shrink more than three per cent this year.

    SOURCE: Al Jazeera and agencies


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