WRAPUP 4-SARS sends tremors through world economy


By Andrea Hopkins and Andrew Priest

WASHINGTON/SINGAPORE, April 24 (Reuters) - Economic fallout from the SARS outbreak sent tremors from Asia to North America on Thursday, with airlines crippled and central banks fearful the crisis could inflict global damage.

Asian stocks fell while the International Air Transport Association warned the virus known as Severe Acute Respiratory Syndrome was devastating airlines, particularly in Asia.

In Canada, the country outside of Asia suffering most from the disease, the central bank warned SARS fears could rattle consumer and business confidence, cut growth and hurt airlines, retailers, mass transit and the hospitality sector.

The Reserve Bank of New Zealand made a surprise cut in interest rates, citing risks posed by the virus and weakness in the global economy, as well as other local concerns.

These warnings came less than a day after the World Health Organization urged people to delay non-essential travel to Toronto, Beijing and China's Shanxi province, adding to its existing warnings for Hong Kong and Guangdong province.

SARS, a sometimes deadly respiratory infection caused by a relative of a common cold virus, has killed about 262 people and infected 4,600 since emerging in China late last year.

Asian stocks in many sectors have already been swept lower by SARS worry but selling picked up still further after China reported more cases. Hong Kong shares slid to their lowest levels in 4-1/2 years, Taiwan stocks fell 4 percent and Singapore shares fell 2 percent.


A report that top Japanese carmaker Toyota Motor Corp plans to withdraw most of its Japanese staff and their families from Beijing due to the virus deepened the gloom.

"Now SARS seems a little bit more protracted and it's affecting China. People are revising down China's GDP numbers and that's an important growth engine for us," said Roy Phua, fund manager at DBS Asset Management in Singapore.

U.S. Treasury bonds got a lift from the latest SARS developments which have led to a constant trickle of downward revisions in global growth forecasts from investment banks.

The Paris-based Organisation for Economic Cooperation and Development, citing past public health scares, said the economic impact of SARS could be significant, while the World Trade Organisation warned on Wednesday that global commerce would be shaken if trading giant China was severely hurt by the crisis.

Government attempts to shore up confidence seem to be doing little to turn the tide of anxiety over the virus.

Hong Kong unveiled a $1.5 billion SARS relief package on Wednesday after Singapore pledged $129 million for its troubled tourism and transport sectors. Malaysia has said it may ask banks and utilities to cut costs for corporate customers.

In Toronto, Canada's largest city and the epicenter of that nation's outbreak, officials huddled in emergency session to devise strategies to cope with the disease, which has killed 16 there and fanned a public-relations crisis.

Major League Baseball has cautioned players competing in Toronto against signing autographs, riding transit and visiting local hospitals, compounding Canadian fears that tourism from the United States -- a key component of growth -- will dry up.


With hundreds of flights canceled and Asian airports eerily empty, Cathay Pacific Airways and parent Swire Pacific Ltd. said they may cut dividend payouts to preserve much-needed cash.

The warning from the Hong Kong-based airline was reinforced by the International Air Transport Association. SARS "is devastating for airlines based in the (east Asia) region," IATA spokesman William Gaillard told Reuters.

"Airlines in the handful of affected countries are reporting sharp falls in traffic and tourist travel," he said, citing local airlines as well as top carriers with strong Asian networks such as United Airlines , Northwest Airlines Corp. and British Airways .

In the United States, which has not suffered any deaths from the virus, several Wall Street firms have restricted travel to certain Asian nations.

The World Bank cut 0.5 percentage point from its East Asian growth forecast, in part due to the impact of SARS on tourism, business travel, transportation and retail. It now sees 5 percent growth this year.

But the impact would fall unevenly across the region.

"A 10 percent fall in tourist arrivals would have an impact effect of less than 0.2 percentage points of GDP in China but one of 0.5 percentage points in a more tourism-dependent economy like Hong Kong," it said.

"Countries with high foreign reserves and a decent fiscal position may well be inclined to consider carefully designed policies that support economic activity during the shock."

Although China is the country hardest-hit by the outbreak, its robust economy and domestic demand should act as a partial buffer for export-driven Asian nations, the World Bank said.

"SARS may have a severe effect over the short term, but it is unlikely to stop the discernible underlying trend towards a gradual strengthening of East Asian domestic demand and activity," it said in a report. (Additional reporting by Gilbert Le Gras in Ottawa, Steve Keating in Toronto, Graeme Peters in Wellington)



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