International | May 28 2009
By Chris Shaw
Swine flu, or the Influenza H1N1 virus as it is more correctly called, has now spread to more than 46 countries, with around 13,000 people infected and more than 90 deaths from the virus as at May 26th. In response the World Health Organisation (WHO) has maintained its phase 5 risk assessment level, which as DBS Group points out is one level below the peak alert level.
There are two keys to an assessment of the outbreak of the virus to date and its potential impact for the Asian region in the group’s view, the first being the number of new cases of infection being reported to the WHO has not dropped in recent weeks, staying at about 500 per day.
The second is the infection is continuing to spread geographically as more than two-thirds of new cases are now being identified outside of Mexico compared to just one-third of such cases a month ago. Many of these new cases have been in Japan, DBS pointing out this is bringing the outbreak into greater focus for the region overall and developing Asia in particular.
As DBS points out, the H1N1 virus is now more widely spread than was SARS in 2003 given its 13,000 confirmed cases are more than the 8,000 total SARS cases, but SARS was around 10 times more deadly at greater than 10% of cases against less than 1% for those with the H1N1 virus outside of Mexico. This is only partial comfort as the group suggests if the H1N1 virus continues to spread at its current rate the impact in terms of lives lost will be similar.
There are a number of ways the virus can impact on economies in the region, DBS noting the first and most immediate being on tourism as travel to impacted regions is postponed or cancelled outright. There is also a domestic impact as people are less inclined to eat out and shop less to avoid coming in contact with the virus.
Another possible effect is on business spending, as the uncertainty associated with any prolonged outbreak of the virus is likely to see companies reduce their previously planned levels of production and investment.
To get an indication of the potential scale of any impact, DBS Group has looked back at what effect SARS had on economies in the Asian region. It notes the peak impact of the virus was in the second quarter of 2003 and during that period consumer spending fell by 2.3-3.7% in quarter-on-quarter seasonally adjusted terms in the Singapore, Hong Kong and Taiwan economies. This flowed through to a GDP impact, which fell by 1.0-2.2% in these economies in the period.
To date the outbreak of H1N1 has not impacted tourism in the region, but if the number of cases continues to increase this could change in the group’s view. The most at risk appear to be those with greater reliance on tourism, which DBS suggests include Hong Kong, Malaysia, Singapore and Thailand.
What also needs to be considered, according to DBS, is the possibility tourists simply avoid the Asian region out of concern about the virus as travellers generally class regions as a whole, meaning a country could be shunned even if it is relatively immune from the virus.
The SARS outbreak offers proof of this as the group points out in the April to July period in 2003 tourist arrivals in Singapore, Hong Kong, Thailand, China, Taiwan and Malaysia all saw swings of as much as 90% despite significantly different levels of infection rates.
According to DBS, there is no way to accurately predict the economic impact on the Asian region of the H1N1 virus as how long the virus lasts and how many people eventually get infected is impossible to estimate. Its conclusion is the longer the virus remains in play, the greater the potential for significant economic pain to be inflicted.