Covid v. SARS: Why Quick Economic Recovery Is Unlikely

To see what economic recovery from Covid-19 could look like, some people are examining the closest modern equivalent: Hong Kong in 2003. That is when the territory’s economy was ravaged by severe acute respiratory syndrome–another epidemic caused by a coronavirus–and then staged a remarkable comeback in less than a year.
The outbreak started early in the year; by May, Hong Kong’s economy was reopening–like today. So speedy was the recovery that eight months after patients first hit hospitals, Hong Kong was hosting a $100 million concert series featuring the Rolling Stones, Prince and Neil Young.
But a closer look at SARS shows why this time a sharp recovery is unlikely–in Hong Kong or anywhere else.
Despite some similarities to Covid-19, SARS proved much easier to contain, and spread less broadly. The latest disease is more persistent and hard to detect, meaning reopenings will be slower and more tentative. And because the entire globe is infected, economies are less likely to fully revive until their trading, travel and business partners have recovered, as well.
At the depth of the SARS downturn during the second quarter of 2003, Hong Kong’s economic growth fell 2.4% from the previous quarter, before rebounding 6.1% in the third quarter. Although SARS pummeled some industries, including aviation, the impact was largely limited to Asia, and the epidemic barely registered in the global economy.
Trade, which drives Hong Kong’s economy, actually grew more than 11% in 2003 from 2002.
This time around, Hong Kong’s economic output, as measured by gross domestic product, fell 8.9% in the first quarter from the previous quarter and will likely stay negative for at least two more quarters, forecasts Singapore-based DBS Bank Ltd. Trade for the first quarter is down 10%.
Globally, economic output shrank 1.8% for the 35 major nations of the Organization for Economic Co-operation and Development in the first quarter. The OECD expects global economic activity to contract 6% this year–or 7.6% if a second wave of infections forces countries back into lockdown.
“I don’t think we will see a V-shaped recovery,” says Nicholas Kwan, research director at the Hong Kong Trade Development Council, who recalls that in 2003, everything had basically restarted by July. This time, Hong Kong has the added pressure of political unrest as China tightens its control over the population.
To get back to pre-Covid levels will take “a year or two, or even longer, ” he says.
In many ways, SARS was eerily similar to today’s crisis. The modern world’s first deadly coronavirus, it emerged in southern China, likely from a market selling wild animals to eat. Patients suffered from fever, shortness of breath and pneumonia; around 10% died.
Mr. Kwan–then a researcher at Hong Kong’s central bank–was quarantined at home for two weeks after a close friend was found to be infected. Schools closed, restaurants shut, people shunned contact with others, and everyone donned masks.
The virus spread as far afield as Canada and Vietnam. Public-health officials feared a full-fledged pandemic, and the World Health Organization advised against nonessential travel to Hong Kong and parts of China. Companies like Walmart Inc. banned employee trips to much of Asia.
Airlines based in Asia lost around $6 billion in revenue and 9% of traffic volume due to SARS–before Covid-19, the most serious blow the industry has faced from an epidemic, estimates the International Air Transport Association. Hong Kong’s visitor arrivals fell almost 68% and hotel occupancy plummeted to 18%.
But SARS ultimately proved to be much easier to contain than initially expected because it was most contagious while its victims were clearly ill–unlike Covid-19, which can be spread by people who have no idea they are infected. In all, SARS infected 8,000-plus people in more than two dozen countries before it burned out. Covid-19 has infected more than 7 million people globally.
By the summer of 2003, with the help of some social distancing and better protections for health-care workers, SARS had largely vanished.
Businesses catering to domestic demand bounced back first. Then, after the WHO lifted its travel advisory on Hong Kong in June of 2003, businesses that depended on visitors also rebounded. Subway traffic and visitor arrivals recovered in about four months; retail sales and airline traffic in around six or seven.
Hong Kong also got a huge boost from mainland China, which was booming then in a way it isn’t now, and resumed its rapid climb once the main SARS threat passed. In July of 2003, China started easing visa restrictions on individual travel to Hong Kong, which opened the floodgates to an influx of tourism that amounted to a massive stimulus.
That is not how this pandemic is playing out. In Hong Kong, as is the case everywhere, government measures to control the coronavirus have been stricter, and the corresponding economic blow much greater. Hong Kong’s retail sales fell more than 40% in February and March from a year earlier–around triple the deepest drop during SARS. Visitor arrivals in April were down 99.9%.
The entire world has thrown up barriers to travel, as the infection burns through one region after another. Most countries aren’t likely to lift those any time soon, meaning that even if domestic demand starts to recover, the sizable parts of the world’s economies that rely on travel and trade will continue to suffer. Global air traffic probably won’t recover to 2019 levels until 2023, predicts IATA.
The deeper global interconnections now than in 2003 also mean it will be hard for economies to recover until their trading and business partners do.
In Hong Kong’s Kowloon district, Danny Hussain, owner of a men’s tailor shop called La Elite Fashions, says his business won’t come back as long as the virus rages elsewhere, because he is largely dependent on business travelers and expatriates. He has laid off four of his six staff and is considering shutting shop for a few months and moving to a cheaper location if his landlord refuses to discount his rent.
It will take time for American or European customers, many of whom have lost jobs or income, to feel comfortable about traveling and splurging abroad–a problem that will play out in major cities across the globe, including Hong Kong.
“They’re not going to take a bag and travel to Hong Kong to come and buy a suit over here–first they are going to put their life back” together, says Mr. Hussain. “Things are not going to be what they used to be for some time. Those days are gone.”

https://www.marketscreener.com/news/Differences-Between-New-Coronavirus-and-SARS-Show-Why-Quick-Economic-Recovery-Is-Unlikely–30761873/