WORRY GOES VIRAL
As the Covid-19 outbreak sends ripple effects worldwide, there are still more questions than answers about the long-term impact.
The coronavirus that emerged late last year in central China has taken a terrible toll of human lives, but as efforts to contain it gather momentum, attention is turning to the health of the Chinese, Asian and global economies. How sick are they and how long might a full recovery take?
As of last Friday there were nearly 65,000 confirmed cases of illness from the virus, now officially known as Covid-19, in China and 27 other countries including Thailand. It is not yet clear whether the infection rate is slowing down, as China just last week changed its reporting criteria, resulting in a spike in the numbers.
News of viral infections and deaths has been spreading since mid-January, sowing panic across the globe and leading the World Health Organization (WHO) to declare a global health emergency. Nervous consumers are queuing to buy face masks and hand sanitiser , and thinking twice whenever they go out in public.
Concern about the spread of the virus has led to massive cuts in air travel, especially to and from China, and cancellations of major public events. Among the highest-profile casualties last week was the Mobile World Congress, which normally attracts 100,000 people to Barcelona for one of the tech world’s grandest gatherings.
Reports of quarantined cruise ships — including one that spent days cruising aimlessly around the Gulf of Thailand before being allowed into Cambodia — further illustrate the high degree of anxiety.
Against this backdrop, economists are trying to gauge the impact the sharp contraction in activity in China will ultimately have. The Chinese economy, which grew by a disappointing 6.1% last year, could slow to 4.5% growth in the first quarter, according to a Reuters poll, and 5% for the full year.
The concern is acute in Southeast Asia, where many economies are heavily interconnected with the world’s second largest economy. Export and im p ort activit y and tourism are the areas being hit the hardest.
Piti Srisangnam, an economics professor at Chulalongkorn University, said the ripple effects are being felt throughout global supply chains.
For example, Hyundai had to suspend production for several days this month at its Ulsan complex in South Korea, which has an annual capacity of 1.4 million vehicles, because it had run out of parts made by suppliers in Wuhan, the epicentre of the outbreak. Nissan had to close a plant in Japan for two days for the same reason.
Some factories in China that normally would have reopened on Feb 3 after the week-long Lunar New Year holiday remained closed to ensure the safety of workers, and are only expected to resume production this week.
“The global economy will experience shrinkage in the wake of the outbreak because the slowdown will occur worldwide,” said Mr Piti. “Also, China has many megaprojects that contribute to the world economy. Now, due to the virus, the momentum will slow down.
“Factory closures in China will disrupt supply chains that are dependent on orders from those factories. Whoever depends on China, they will experience a shortage of supply.”
TRAVEL TUMBLES
The prospects for the global travel industry, he noted, were already dim prior to the outbreak as economic conditions overall were weak. That was partly the legacy of the trade war between the United States and China, who have now reached a truce of sorts.
Mr Piti said the fallout from Covid-19 would be profound in the travel and tourism industry and on private consumption in Asia and around the world.
The airline industry is already bracing for loses of up to US$5 billion this year, the International Civil Aviation Organization (ICAO) said last week. It said 70 airlines had cancelled all international flights in and out of China and 50 others had reduced operations since the virus first emerged.
Moody’s Investors Service notes that the outbreak occurred at a time when passenger growth
We prepare for the worst and work to be the best so that it won’t happen DR THANARAK PLIPAT Department of Disease Control
was already slowing in Asia Pacific, excluding Malaysia, as a result of softening economic conditions. A greater concentration of Chinese travellers in Asia Pacific has rendered airports in the region, and the companies that operate them such as the highly profitable Airports of Thailand Plc, more vulnerable.
In Southeast Asia, the number of travellers from China and other regional countries, the main drivers of the tourism industry, has been dwindling fast.
“The virus impacts the tourism sector immensely, especially in Thailand where half a million Chinese tourists visit monthly. This month and next month that number will dwindle profoundly, maybe down to zero,” the professor said, noting that everyone will take a hit, from airlines and hotel chains to restaurants, ground transport services, retailers, guides and souvenir shops.
Nearly 11 million Chinese holidaymakers — about 40% of them on group tours, which China banned on Jan 27 — spent some 570 billion baht in Thailand last year, more than a quarter of all foreign tourism receipts. The tourism industry as a whole contributes 21% directly and indirectly to the country’s gross domestic product, according to the World Travel & Tourism Council.
The Tourism Authority of Thailand is now resigned to a drop of at least 2 million Chinese arrivals this year, while overall arrivals could fall by 5 million from 39.8 million in 2019.
The Tourism and Sports Ministry has estimated that reduced travel from China alone could result in 50 billion baht in lost tourism revenue.
Not only does fear of getting sick deter international travellers, local people are also avoiding going out to public places, which will hurt the economy further.
Mr Piti recommends that governments in affected countries adopt stimulus measures to cope with the situation, such as incentives that encourage businesses to offer discounts and promotions to win visitors back.
Agriculture is another sector facing trouble, as if reduced harvests of key commodities because of drought conditions was not bad enough. In the short term, though, there could be an oversupply of products that normally would be shipped from Thailand to China, and ways need to be found to cope with this reality, he said.
To help alleviate the impact, Mr Piti said he would like to see broader-based stimulus policies that could generate shared benefits for the world economy. This is no time for trade protectionism, he added.
In any case, he predicts that the situation will be improve in the coming months. And while it is hard to give a timeline, the world economy will likely take a severe blow in the first quarter while a recovery will start to occur in the third.
During the Severe Acute Respiratory Syndrome (Sars) outbreak in 2002-03, the Chinese economy slowed sharply in the first quarter of 2003 but growth returned to normal by the third quarter. Commentators note, however, that China’s economy today is much larger and more closely interlinked with the economies of countries all over the world. As well, the scale of the Covid-19 outbreak has grown beyond that of Sars, although the response of Chinese and global health authorities has been much better.
SHORT-TERM PAIN
While policymakers and planners worry about the macroeconomic impact of the virus, the outlook on the ground is grim, especially in Thai destinations such as Bangkok, Chiang Mai and Phuket, which normally are thronged with Chinese visitors at this time of year.
“From my estimation based on revenue, the number of tourists, not just Chinese, has dropped by 30-40%,” said Namfon Nooplod, a 29-year-old restaurant owner in Phuket. Thankfully, she said, there are still some tourists from other countries.
Ms Namfon’s seafood restaurant is one of the most popular spots on Karon Beach, where travellers usually stroll on the long Beachwalk filled with dining, shopping and nightlife spots.
“My restaurant is located on the main street; it usually has more tourists,” she said last week. “We are open from 10 am to 1 am and it is usually crowded all day long.”
Even though tourists are still frequenting her restaurant, none spend like the Chinese, she said.
“Chinese tourists usually come in groups, and when it comes to food, they have no limit — a group of Chinese tourists would order eight thousand to twenty thousand baht worth of food and drinks per table.”
Meanwhile, bookings in restaurants and hotels are being cancelled and people are scared to go out, Ms Namfon observed. Even though businesses located on main streets are able to carry on, in other streets, shops and restaurants do not fare well due to the lack of pedestrians.
“I want to encourage people to travel,” she said. “The virus is not worrisome”.
PREVENTIVE MEASURES
Meanwhile, health professionals from around the world are continuing their efforts to slow the spread of Covid-19, while researchers try to come up with treatments that could still be months away.
Dr Daniel Kertesz, the WHO representative in Thailand, told a recent conference that the priority for member states right now is “limiting human-to-human transmission”.
The work includes identifying cases, isolating them so that they will not infect others, and tracing their contacts. “The second thing is really about addressing the crucial unknowns,” he added.
Dr Kertesz emphasised the importance of global sharing of information and data that allows the international community to get a better sense of questions that haven’t yet been answered.
Discussing whether it is necessary for countries to impose travel bans on Chinese visitors, Dr Kertesz said the WHO understands that different countries’ decisions were made based on their national considerations, but the organisation does not suggest the international community employ such an approach.
“Our experience is that they (travel bans) are not particularly effective,” he said.
He explained that a travel ban merely contributes to deferring the expansion of the infection, and it also creates difficulties for the international community to provide technical support to infected areas.
In Thailand, where 33 cases have been reported to date, the government and public health professionals are confident they can deal with whatever arises. That helps to explain why the country has not imposed a ban on Chinese visitors.
The Global Health Security Index (GHS Index), created by Johns Hopkins University, ranks Thailand sixth in the world, notes Dr Thanarak Plipat, deputy director of the Bureau of Epidemiology in the Department of Disease Control at the Ministry of Public Health.
The survey of 195 countries examines their capabilities of handling infectious disease in areas ranging from prevention, detection, reporting and rapid response to the health system, compliance with international norms and the risk environment.
Thailand was ranked sixth overall, the best in Asean, where Malaysia was ranked 18th and Singapore 24th. Far behind were Vietnam (50th), Myanmar (72nd), Laos (73rd), and Cambodia (146th).
Dr Thanarak believes that with cooperation between the public and private sectors, the capacity of the healthcare system in Thailand can be greatly improved, increasing the chances of the situation being contained.
Dealing with the prospect of an epidemic, he explained, is divided into four phases. In phase one, the focus is on early detection of cases in travellers.
“The measures taken include setting up entry screening at airports and establishing surveillance in the health sector as well as the public.”
Phase two begins when local transmission starts to materialise, possibly from the travellers to local residents. This began after the first case of local transmission was reported in a Thai taxi driver who had never travelled to China but possibly contracted the virus from a Chinese passenger.
Phase three is the phase of acceleration if infections spread throughout the country. The focus would be on slowing the spread of the virus and elevating the capacity of the domestic healthcare system.
“It may not happen at all. But if it happens, we know what our government needs to prepare for,” said Dr Thanarak. “Of course, we prepare for the worst and work to be the best so that it won’t happen.
“If the worst case happens, I think we might suffer a little bit, but I think we can handle it.”