Singapore: Fears that tentative green shoots in the global economy could be trampled by a deadly outbreak of swine flu put Asian markets on edge on Monday, after world policymakers said over the weekend that a recovery could begin later this year but a lot of downside risk remained.
The virus has killed up to 103 people in Mexico, and infections have been reported in the US and Canada, with possible cases in Europe, Israel and New Zealand. The World Health Organization (WHO) has declared the flu a “public health emergency of international concern” that could become a pandemic.
“There are fears that ultimately, it could lead to reduced travel and tourism, reduced stays in hotels, adding to the slowdown globally and specifically for the countries involved,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney. Analysts said any worldwide pandemic could hit poor countries particularly hard, due to lower health care standards.
On Sunday, global finance and aid ministers warned at a meeting in Washington that the world’s poor already faced a human catastrophe from the impact of the financial crisis.
Ministers from the 185 member-countries of the World Bank and the International Monetary Fund (IMF) called on rich nations to accelerate aid to the developing world to prevent disaster. “We must continue to act in real time to prevent a human catastrophe,” said World Bank president Robert Zoellick.
The World Bank said the global crisis had been a major setback to poverty reduction. It said the crisis would push 53 million more people into extreme poverty in 2009, and cause 200,000-400,000 more infant deaths each year.
“These numbers will rise if the crisis deepens and growth in developing countries falters further,” it said.
Mexico’s finance minister Agustin Carstens said it was too early to judge the impact of the flu on the economy. “This issue can have an important impact on the economy, although the most important impact is the one on human life and human well-being,” he said. “At this stage, without ignoring that this is a very serious matter and that it has a high potential for disruption, I would say it’s too early to give a more concrete opinion.”
US crude oil futures for June delivery dropped at least 4% to $49.06 (Rs2,453) a barrel by 1033 GMT on Monday on fears that swine flu could spread.
“The swine flu in Mexico is also causing some risk aversion in the markets and is already weighing on the Dow,” said Ben Wesmore, analyst at National Australia Bank.
Asian stocks were mixed, supported by optimistic comments from world leaders that the economic crisis may be past its worst, but edgy over flu risk fears—although pharmaceutical stocks were up.
The flu outbreak came when world policymakers were proclaiming the start of tentative recovery. “Six or eight weeks ago, there were no positive statistics to be found anywhere. The economy felt like it was falling vertically. Today, the picture is much more mixed,” Lawrence Summers, economic adviser to US President Barack Obama, said on Sunday.
The Group of Seven (G-7) rich nations said on Friday that the world economy was showing early signs of recovery.
“Economic activity should begin to recover later this year amid a continued weak outlook, and downside risks persist,” G-7 finance ministers and central bankers said in a joint statement.