By Sharina Ahmad
THE spread of the Wuhan coronavirus has reached an alarming stage and has far-reaching consequences for the economy.
Alliance Bank Malaysia Bhd chief economist Manokaran Mottain says it is still too early to estimate the expected loss that could be caused by the highly contagious coronavirus.
“The economic impact of the outbreak just depends on the severity and disruption that it causes.
“For instance, in 2003, the global economic loss from severe acute respiratory syndrome (SARS) was close to US$40 bil. Malaysia was one of the countries that experienced a huge loss, largely reflecting greater capital outflow and a good trade link with China,” he tells FocusM.
Like SARS, Manokaran says coronavirus is expected to seep into the economy largely through the confidence and demand channels with the adverse impact materialising in the near term.
He emphasises that even though only five cases of SARS were confirmed in Malaysia, the tourism industry alone lost an estimated US$1.7 bil in 2003. (Total tourist receipts in 2003: RM21.2 bil vs RM25.8 bil in 2002. Total tourism receipts from China in 2003: RM0.9 mil vs RM1.5 mil in 2002.)
Sunway University Business School economics professor Dr Yeah Kim Leng stresses that at this juncture, the stock market is likely to remain jittery pending greater clarity on the potential of the virus to develop into a full-blown crisis or pandemic.
“It is not a black swan event given similar outbreaks before like SARS, Ebola, Middle East Respiratory Syndrome (MERS) and Influenza A (H1N1).
“The extent to which each country is affected will depend on its ability to contain the spread of the virus. This will then limit the economic losses associated with disruptions to travel, business and production activities,” says Yeah.
However, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid says judging from the robust growth in tourist arrivals from China, it seems that risks of contagion are quite high.
“For instance, Malaysia experienced a higher growth of tourist arrivals from China of 9.8% per annum between 2000 and 2018 to 2.9 million in 2018. In Singapore, Thailand and Indonesia, the growth rate was much higher at 11.5% (3.4 million in 2018), 15.4% (10.6 million in 2018) and 25.3% (2.1 million in 2018).
“As such, it could affect the spending pattern as consumers would refrain or minimise their outside activities,” he says.
Manokaran says the outbreak would cause a sharp decline in travel, tourism and commerce and retail trade.
“Since the Malaysian government has halted all immigration facilities including issuing visas for Chinese citizens from the affected areas, a significant drop in the total tourist receipts can be seen during the first half of 2020, assuming the outbreak persists at least until mid-year.
“(There is) direct impact on airlines, wholesale and retail, as well as the hotel and restaurant sectors (services as a whole),” he says.
With the virus continuing to spread and the Chinese government imposing travel curbs on Wuhan and seven other cities in China, Manokaran notes that the outbreak is likely to affect the Visit Malaysia 2020 campaign.
China was the third-biggest source of foreign tourists (about 13% of total tourist arrivals of 20.1 million) after Singapore and Indonesia from January to September last year.
Nevertheless, Mohd Afzanizam says higher demand for healthcare-related products such as pharmaceutical and rubber gloves would benefit some of the Malaysian companies.
“More importantly, is how the outbreak could affect the growth momentum of China’s economy.
“This is especially true when Hubei is situated in central China while its capital city Wuhan is the largest transportation hub central China.”
He said Hubei’s main industries are automotive, iron and steel, petrochemical, food processing, equipment manufacturing, electronic information and textiles. – Feb 3, 2020
