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/
