Nusa Dua, Indonesia: Asia’s trade and tourism could be hit by the new flu outbreak but lessons from the SARS epidemic in 2003 will boost efforts to counter the effects, the top economist of the Asian Development Bank said on Sunday.
Jong-Wha Lee, the ADB’s acting chief economist, also told Reuters that Asian economies had probably reached the bottom of the current downturn but a major recovery still hinged on demand from the world’s leading industrialised nations.
He added countries lacking political stability, such as Thailand, could lag behind others in emerging out of the worst economic downturn in at least a decade.
“The influence could come in two forms,” Lee said referring to the economic impact of the flu outbreak.
“First, it could hurt the tourism industry and labour mobility. Secondly, it could damage domestic consumption as well by affecting the psychology of consumers,” he said.
“But I think Asia has been well prepared (to fight the virus) because the region has good experience in countering SARS,” he said on the Indonesian resort island of Bali, where the ADB was holding its annual meeting.
SARS, or Severe Acute Respiratory Syndrome, killed more than 800 people around the world in 2003. It first appeared in southern China in November 2002 and began spreading in February 2003.
Eighteen countries around the world have reported around 650 confirmed cases of the new H1N1 flu in recent weeks, but Asia has only two confirmed cases in Hong Kong and South Korea.
Lee cautioned about too much optimism about an early recovery in Asian economies.
“It is almost impossible for the region to return to the boom seen until 2007 before demand from the advanced economies fully regains strength,” Lee said.
“Asia has been hit relatively less than the other regions because its banking system was sound and so could keep expanding credit,” he said, adding this was in contrast to the 1997-1998 Asian financial crisis.
But he played down an argument that financial markets were posing a threat of a backlash by betting too much on economic turnaround, saying that financial markets by nature swing back and forth especially during a period of heightened volatility.
He added political stability was important for countries in the region to implement fiscal stimulus measures swiftly and achieving a quick economic turnaround.
“The reason why we consider (the prospects for) Thailand as uncertain and why it is not bottoming out yet is that political uncertainty has increased there in addition to the fact that it’s an open economy and there’s also impact from exports,” he added.