Severe Acute Respiratory Syndrome (SARS) has highlighted the potentially severe threat posed by infectious diseases to modern economies.

Background

SARS was first detected in southern China in November 2002. Five months later on 28 April 2003, after spreading to 28 countries, the World Health Organization (WHO) announced its containment in Vietnam, and the encouraging news that the outbreak may have peaked in the high risk areas of Toronto, Hong Kong and Singapore.

Much is yet to be discovered about the virus in terms of both its lethality and its communicability. The lethality of the virus is yet to be confirmed due to the early stage of the epidemic and statistical anomalies in reporting. Current estimates of the death rate stand at up to 10 per cent.⁽¹⁾ At this stage, SARS is thought to spread by close person-to-person contact or direct contact with infectious material, with most cases affecting carers and health care workers of patients.

Research on the cause of the virus has focused on the presence of a previously unknown coronavirus in the majority of SARS patients. Coronaviruses are common in livestock and poultry, but were previously thought to cause only common colds in humans.

The Infectious Disease Threat

The threat posed by infectious disease is not new. Influenza pandemics occurred in 1957 (the Asian flu), 1968 (the Hong Kong flu) and most notably in 1918 (the Spanish flu). The Spanish flu, occurring at the close of World War I, resulted in more than double the number of battlefield deaths. Australia suffered more 11 500 Spanish influenza related deaths, with 60 per cent of these in the 2045 years age group.

However, modern travel, migration, demographic changes, commerce and even medical procedures (overuse of antibiotics causing microbial resistance) have greatly increased the threat of infectious disease outbreaks. It is a widely accepted belief in the scientific community that it is not a question of whether, but when another pandemic such as the 1918 Spanish influenza occurs.

The economic cost of infectious disease outbreaks are increasingly becoming a global concern. Estimates on the cost of the SARS outbreak range from US$10 billion to US$30 billion. This can be compared to the 1994 locally-contained outbreak of plague in Surat, India, estimated to cost of US$2 billion and the 1997 Avian Flu in Hong Kong estimated to have cost hundreds of millions of dollars in lost poultry production, commerce and tourism.⁽²⁾

A study by the US National Center for Infectious Diseases in 1999 estimated that the economic impact of an influenza pandemic in the United States would range from US$71.3 billion to US$166.5 billion.⁽³⁾ If an influenza pandemic such as the 1918 Spanish influenza were to occur in Australia today, it could be expected to cause more than 42 000 deaths per year, resulting in an enormous economic cost.⁽⁴⁾

Economic Costs

While the economic costs of the SARS outbreak are only just beginning to be calculated, it is already clear that it will severely affect the growth rates of major East Asian economies.

Given that East Asia, excluding Japan, was the fastest growing region in the world economy in 2002, the effect of SARS on regional economies will be felt globally. Reflecting these uncertain global conditions, the World Trade Organization issued a revised forecast of 2.5 to 3.0 per cent global trade growth in 2003, compared to an original forecast of 5.0 per cent.

Similarly, the Asian Development Bank (ADB) and the World Bank⁽⁵⁾ have both cited SARS in forecasting weaker growth rates for the East Asian region.

Immediate Effects

The immediate economic effects of the SARS outbreak have affected services-related businesses, particularly those in the tourism services sector. Cancelled or postponed business and leisure tourism has further compounded the effect of softened domestic demand as consumers avoid restaurants and public places, seeking to minimise the risk of infection.

This has exacerbated the effects on the tourism industry already suffering from weakened demand due to the conflict in Iraq and terrorism scares. The Australian Tourist Commission has indicated drops in international arrivals both from SARS affected countries and long-haul travellers, deterred by conflict in Iraq, terrorism and undesirability of transit in popular stop-over destinations, Hong Kong and Singapore.

Similarly, the education services sector will be adversely affected as student numbers reduce in the short term to avoid infection through air travel and possible quarantine periods, and in the long term due to weaker economic conditions in domestic economies.

Softened domestic demand has also affected downstream sectors, in Australia's case affecting the demand in key markets for live crustaceans and fish, dairy, meat products and fresh fruit.

Long-term Effects

While the longer-term effects of the SARS outbreak are yet to be determined due to its evolving nature, several points have become evident: