Lessons From SARS: How The New Bird Flu Could Hit The Chinese Economy
Bank of America's Ting Lu writes that if the new bird flu worsens his Q2 GDP forecast would be revised down to reflect 8 percent growth, from 8.1 percent.
To get a better sense of what to expect, Lu points us to the impact of SARS in 2003. At the time, SARA caused Chinese GDP growth to fall by 2 percentage points in one quarter, or an annualized 0.5 percent.
"Overall, SARS imposed a sizeable but non-lasting negative shock to the Chinese economy. While SARS hit the economy across the board, it also boosted demand in certain products such as masks and vaccines."
Here's a breakdown of the economic impact of SARS in 2003:
GDP – The SARS virus began in November 2002 and continued until March 2003. GDP growth climbed from 8.1 percent in Q4 2002, to 10.8 percent in Q1 2003, and fell to 7.9 percent in Q2 2003. But in Q3 it climbed to 9.6 percent.
BAMLCatering and accommodation sector – This sector took a big hit going from 17 percent YoY in March, to 4 percent in April and -14 percent in May.
Industrial production – In Jan-Feb industrial production stood at 17.5 percent. Many Chinese economic indicators at the start of the year are considered on a Jan-Feb basis because of the New Year holiday. In March this fell to 16.9 percent and continued to decline reaching 13.7 percent in May.
Home sales – Home sales were barely impacted by SARS but since the property sector has ballooned since then, it could have a more significant impact this time around. Hong Kong's property market was hit hard by SARS.
Financial market – The Shanghai A-share market didn't register a huge impact from the SARS virus, but Hong Kong's market did.
Bottom-line: The biggest impact should be seen on the catering sector, which has already taken a hit as China has cracked down on "gift giving", and the transportation sector.