Economic Impact of SARS in Hong Kong - Ricerca sull'intelligenza artificiale specializzata al MIT

Economic Impact of SARS in Hong Kong
Economic Impact of SARS in Hong Kong

Economic Impact of SARS:
The Case of Hong Kong*

Alan Siu
Associate Professor
School of Economics and
Finance
The University of Hong Kong
K. K. Leung Building
Room 1021
Pokfulam Road
Hong Kong, SAR, China
asiu@econ.hku.hk

Y. C. Richard Wong
Professor of Economics and
Dean
Faculty of Business and
Economics
The University of Hong Kong
Meng Wah Complex, 7/F
Pokfulam Road
Hong Kong, SAR, China
rycwong@fbe.hku.hk

Astratto
SARS is the first deadly infectious disease of the 21st century. It
started in the Chinese province of Guangdong in November
2002, and by August 2003, it had spread to 29 countries and 3 Rif-
gions, with a cumulative total of 8,422 cases and 916 deaths. Questo
paper describes the spread of the disease in Hong Kong and dis-
cusses its impact on the economy. SARS was an unexpected nega-
tive shock. The most significant negative effects were on the de-
mand side, with local consumption and the export of services
related to tourism and air travel severely affected in the short run.
The economy did not experience a supply shock, as the manufac-
turing base in the Pearl River Delta was unaffected, and goods
continued to be exported through Hong Kong normally. Initial
alarmist reports and estimates about the negative economic im-
pacts were not borne out. Fear and panic subsided quickly once
the outbreak was under control, and the economy rebounded
rapidly.

1. introduzione

The World Health Organization (WHO) issued a global
alert about a deadly new infectious disease on 12 Marzo
2003. Three days later WHO named the disease severe
acute respiratory syndrome (SARS). By 7 agosto 2003, IL
disease had spread to 29 countries and 3 regions, con un
cumulative total of 8,422 cases and 916 deaths. The most
severely affected areas were mainland China, Hong Kong,
Taiwan, and Singapore. Within mainland China, the areas

* Financial support from the Hong Kong Institute of Economics
and Business Strategy of The University of Hong Kong funded
as an Area of Excellence by the University Grants Committee of
Hong Kong is gratefully acknowledged. Eva Chan and June
Sieh provided excellent research assistance.

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Economic Impact of SARS in Hong Kong

hardest hit were Guangdong, Beijing, Shanxi, and Inner Mongolia. The outbreak
started in the Chinese province of Guangdong and was carried to Hong Kong, E
from there SARS spread to other parts of the world, including Beijing and other
parts of China.

WHO set up a collaborative network of research labs to identify the virus causing
SARS. Within weeks of the outbreak in Hong Kong, scientists at The University of
Hong Kong had identiªed a new strain of coronavirus as the probable culprit. Questo
virus is highly contagious and can be fatal. Health care workers are particularly at
risk of infection. The exact mechanisms of transmission are still in doubt, but the vi-
rus seems to be spread by intimate contact through transmission of droplets. One is
unlikely to contract SARS from merely being in the vicinity of an infected individ-
ual, because the virus does not appear to be airborne; Tuttavia, the virus can survive
on objects such as doorknobs or elevator buttons for more than 24 hours. Hence, it is
possible to catch the disease by touching contaminated objects. Wearing face masks
and washing hands vigorously using liquid soap are recommended as precaution-
ary measures. There has been no report of transmission of the disease across interna-
tional borders via contaminated cargo. These features of the virus suggest that quick
and effective isolation of infected individuals and quarantine of those who have
been in close contact with them are the key measures for limiting the spread of the
disease.

2. Spread of SARS in Hong Kong

SARS ªrst broke out in November 2002 in Foshan, which is near Guangzhou, in the
Chinese province of Guangdong. The virus made its way to other parts of the Pearl
River Delta by February 2003. China’s Ministry of Health informed WHO in mid-
Febbraio 2003 of the occurrence in Guangdong province of 305 cases of “atypical
pneumonia” and reported that the spread of the illness was “under control.” Local
media reported the outbreak, and the news spread around the Pearl River Delta re-
gion through thousands of cell phone text messages. Hong Kong was alerted by the
news that people across the border were stocking up on Chinese herbal medicines
and boiling vinegar as a folk remedy to ward off the deadly unknown illness.

Because the world was kept in the dark about the seriousness of the outbreak in
Guangdong, Hong Kong was caught unprepared when SARS ªrst appeared in the
territory via an elderly medical doctor from Guangzhou who had been treating
“atypical pneumonia” patients. The doctor checked into room 911 of the Metropole
Hong Kong Hotel on 21 Febbraio 2003 to attend a wedding reception, and he was
admitted to a nearby hospital the next day. He informed the medical staff that he

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Economic Impact of SARS in Hong Kong

was highly infectious, and he was promptly isolated. He later died after infecting a
nurse in the hospital.

The Guangzhou doctor, during his 1-day stay at the hotel, infected at least 10 other
guests staying on the same ºoor of the hotel. All these guests were overseas visitors
except for a Hong Kong resident who was visiting the hotel. The infected visitors
subsequently ignited outbreaks in Vietnam, Singapore, and Toronto, and the local
resident (an airport worker) became the index patient at the Prince of Wales Hospi-
tal. The airport worker developed SARS symptoms on 24 February but did not seek
treatment at the hospital until 4 Marzo. He was admitted into Ward 8A, where he in-
fected over 100 people, including patients, visitors, medical students, nurses, E
doctors. Hospital emergency services had to be suspended temporarily.

In mid-March 2003, the Hong Kong public was told that the outbreak was conªned
to hospitals and was not spreading in the community. No isolation measures were
adopted; for instance, Prince of Wales Hospital was not cordoned off. The authori-
ties had to face reality when SARS broke out in a multistoried housing estate, Amoy
Gardens. On 29 Marzo, 22 del 45 new SARS cases hospitalized in Hong Kong
were residents of Amoy Gardens. On the following day, 36 del 60 new patients
admitted to the hospital with probable SARS were residents of Amoy Gardens,
bringing the cumulative total of infected residents to 213. Of these 213 patients, 107
resided in Block E of Amoy Gardens. Inoltre, most of them lived in ºats that
were oriented vertically relative to each other, which suggested that besides close
person-to-person contact, SARS might have been spreading by other environmental
means.

The Hong Kong Department of Health issued an unprecedented quarantine order to
prevent the further spread of SARS in the community. The isolation order required
residents of Block E of Amoy Gardens to remain in their ºats for 10 days. When the
police carried out the order, they found no one home in well over half of the block’s
264 apartments. Residents had learned about the Amoy Gardens outbreak via the
media and many had left their homes long before the authorities arrived. SARS was
clearly spreading in the community.

Fear of the SARS virus took root in the whole city. Face masks were selling briskly
and could be seen everywhere. Public places were disinfected several times a day.
People washed their hands much more frequently and avoided going out to
crowded places. Restaurants, shops, cinemas, and other entertainment venues were
deserted. Many businesses suffered severe losses of income. Schools were ªnally
closed to limit the spread of the virus.

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Economic Impact of SARS in Hong Kong

Tavolo 1. Cumulative number of SARS cases in Hong Kong (as of 11 settembre 2003)

Overall cases

Medical staff
Comunità

Cases in Amoy Gardens

Infected

1,755
386
1,369
321

Dead

299
6
293
(cid:1)40

Fonte: Department of Health, Hong Kong SAR Government. Available at www.info.gov.hk/info/sars/e_news.htm Information on the

number of cases in Amoy Gardens was pieced together from press releases.

All household contacts of conªrmed or suspected SARS patients were required to
remain isolated in their homes for monitoring and treatment, up to a maximum of
10 days. At the end of the outbreak, a total of 1,262 persons from 493 households
were affected by this isolation order, E 34 of them subsequently came down with
SARS (SARS Expert Committee 2003). The government did not compensate the indi-
viduals for their conªnement, but it did provide daily necessities and ªnancial assis-
tance. The police enforced the order by checking up on conªned individuals at their
homes. Violators were sent warning letters.

Since 29 Marzo 2003, health ofªcials tried to identify travelers who displayed SARS
symptoms at the airport and other border control points. All incoming travelers are
now required to complete a health declaration form. Temperature checks for all ar-
riving, departing, and transit passengers at the airport were implemented in mid-
April 2003. Temperature-screening devices were installed at other border control
points in late April of that year. As of 7 settembre, 83 persons had been referred to
hospitals for suspected SARS, E 2 of them were later conªrmed to have been in-
fected (SARS Expert Committee 2003). Since these measures were implemented, NO
SARS cases have been reported as having originated from Hong Kong.

The SARS outbreak among Amoy Gardens residents and medical staff in Hong
Kong peaked by late April 2003 (ªgure 1). At the ªnal count, Hong Kong had a cu-
mulative total of 1,755 SARS cases, accounting for 20.8 percent of the world total of
8,422 cases. Of Hong Kong’s total cases, 386 were health care workers, 321 were
Amoy Gardens residents, and the rest were from the general community (table 1).
The high number of infected health care workers suggests that to minimize the risk
of exposure, all hospital staff must meticulously follow stringent infection control
measures. The number of infected health care workers each day was very high dur-
ing the early days of the outbreak but later declined substantially.

The case mortality rate in Hong Kong, computed by dividing the cumulative num-
ber of deaths by the cumulative number of infected cases at the end of the outbreak
(the end of June 2003), era 17.0 per cento. As a comparison, 13,480 people caught

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Economic Impact of SARS in Hong Kong

Figura 1. Cumulative number of SARS cases in Hong Kong (12 Marzo 2003 A 11 Giugno 2003)

Fonte: Department of Health, Hong Kong SAR Government. Available at www.info.gov.hk/info/sars/e_news.htm

Figura 2. Fatality rates of SARS cases in Hong Kong by age group (as of 1 settembre 2003)

Fonte: Clinical Trials Centre, Faculty of Medicine, The University of Hong Kong. Available at www.hku.hk/ctc/sars_graphs.htm

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Economic Impact of SARS in Hong Kong

Tavolo 2. Fatal SARS cases in Hong Kong (as of 11 settembre 2003)

Number of fatal cases

Overall fatal cases

Male
Female
Unknown

Fatal cases aged 0–64 years
Fatal cases aged 65 years or older

Total

299
168
129
2
108
191

With history of
chronic disease

No history of
chronic disease

201
108
91
2
43
158

98
60
38
0
65
33

Fonte: Department of Health, Hong Kong SAR Government. Available at www.info.gov.hk/info/sars/e_news.htm

pneumonia in Hong Kong in 2002, and the case mortality rate was 17.5 per cento
(SARS Expert Committee 2003). The SARS mortality rate for young people (less than
44 years of age) was low, whereas fatality rates were signiªcantly higher for the el-
derly population, particularly older patients with a history of chronic disease
(ªgure 2). Of the 299 SARS patients from Hong Kong who died, 191 were 65 years
or older, E 158 of these cases had a history of chronic disease (table 2).

3. Hong Kong’s economy when SARS arrived

Since the onset of the Asian ªnancial crisis, Hong Kong’s economy has faced an un-
favorable external environment. Financial liquidity in Asia drained away in the cri-
sis and its aftermath. Hong Kong’s link to the U.S. dollar through a currency board
arrangement did not improve matters. The Hong Kong dollar appreciated in value
along with the strengthening U.S. dollar during 1999–2002. Investment demand for
housing collapsed at the same time that the housing supply began to soar. Although
nominal mortgage interest rates were kept low in a globally low-interest-rate envi-
ronment, the true borrowing cost was high in real terms, with deºation plodding
along at 2–4 percent per year (table 3). Households were struggling to pay down
their mortgage debts after the housing-market bubble burst. Domestic consumption
was shrinking, and the economy was contracting. Hong Kong’s unemployment rate
hit record levels, exceeding 7 percent by the end of 2002. The unemployment prob-
lem was made worse by the continuous inºow of low-skilled immigrants from
mainland China.

Beginning in 2003, signs of economic recovery had appeared. Real GDP in Hong
Kong grew at 3.4 percent in 2002:Q3 and at 5.1 percent in 2002:Q4. In late spring of
2003, exports from China picked up very strongly, and cargo movement in Hong
Kong ports and airports showed good growth. Così, the outbreak of SARS hit
Hong Kong at a very bad time. Domestic demand collapsed before it had an oppor-
tunity to recover from the recession in 2001. Alarmed by the outbreak at the Amoy

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Economic Impact of SARS in Hong Kong

Tavolo 3. Hong Kong’s economy before the SARS outbreak (1998–2002)

Economic indicator

Real GDP growth (%)
Nominal GDP growth (%)
Consumer price deºation (%)
Unemployment rate (%)
Property price index (domestic)
Budget surplus/deªcit (HK$ billion) Fiscal reserves (HK$ billion)

1998
(cid:2)5.0
(cid:2)4.8
2.8
4.7
117.1
(cid:2)23.2
434.3

1999

3.4
(cid:2)2.6
(cid:2)4.0
6.2
100.0
10.0
444.3

Fonte: Census and Statistics Department, Hong Kong (2003C).

2000

10.2
3.4
(cid:2)3.8
4.9
89.6
(cid:2)7.8
430.3

2001

0.5
(cid:2)1.4
(cid:2)1.6
5.1
78.7
(cid:2)63.3
372.5

2002

2.3
(cid:2)0.8
(cid:2)3.0
7.3
69.9
(cid:2)61.7
311.4

Gardens and by the news that several foreign businessmen might have contracted
SARS in Hong Kong and returned with it to their home countries, WHO issued a
travel advisory on 2 April 2003, urging people to postpone nonessential trips to
Hong Kong and Guangdong. WHO’s travel warning and the reluctance to travel by
air devastated travel and tourism in the Asian region, particularly in Hong Kong.
Many companies worldwide banned business travel to infected areas. Restrictions
on travelers from infected areas aggravated the situation.

As the SARS outbreak raged on in China, the economic environment in the region
darkened as the prospects of the fastest-growing economy in Asia became cloudy.
The uncertain outlook prompted the World Bank to predict that output growth in
East Asia would fall by almost 1 percentage point in 2003, A 5 per cento (World Bank
2003). Analysts and rating agencies also revised their forecasts downward (table 4).
On average, private sector analysts estimated that Hong Kong’s output growth in
2003 would be 1.2 percentage points lower than previously expected, which trans-
lated to a drop of around HK$15 billion in spending on ªnal goods and services in the domestic economy. On 9 April 2003, the government announced that the original forecast of a 3 percent real growth rate in GDP would not be met. Doom and gloom hit the region and Hong Kong. 4. Economic impact of SARS in Hong Kong 4.1 Early predictions and concerns during the SARS shock Table 5 shows the decomposition of Hong Kong’s GDP between 2000 E 2002 by types of spending. Three areas of Hong Kong’s economy would have been particu- larly vulnerable to a long-term SARS outbreak: consumption spending, tourism, and re-exports. Because Hong Kong’s total private consumption expenditure in 2002 era 57.8 percent of GDP, a long-term drop in consumption spending resulting from a widespread fear of SARS would have had a very signiªcant adverse impact on output if the disease had not been controlled fairly quickly. 68 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / d i r e c t . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 3 1 6 2 1 6 8 8 2 7 5 1 5 3 5 3 5 1 0 4 1 7 4 7 9 9 6 p d . f b y g u e s t t o n 0 8 S e p e m b e r 2 0 2 3 Economic Impact of SARS in Hong Kong Table 4. Private sector forecasts of Hong Kong’s output growth and inºation (2003) Output growth Consumer price inºation Previous (per cento) Latest (per cento) Economist Intelligence Unit (EIU) Bloomberg News Survey Forecasts by major private companies J.P. Morgan Chase HongKong and Shanghai Banking Corporation BNP Paribas Peregrine Citibank DBS Bank Internationale Nederlanden Group (ING) Goldman Sachs Lehman Brothers Morgan Stanley Merrill Lynch ABN Amro Bank Average 2.5 2.9 3.2 1.6 1.5 2.8 1.8 3.0 3.0 2.5 2.7 4.6 4.0 2.8 0.3 2.1 0.3 0.5 0.9 1.0 1.2 1.5 1.7 2.0 2.1 3.1 3.5 1.6 Difference (percentage point) (cid:2)2.2 (cid:2)0.8 (cid:2)2.9 (cid:2)1.1 (cid:2)0.6 (cid:2)1.8 (cid:2)0.6 (cid:2)1.5 (cid:2)1.3 (cid:2)0.5 (cid:2)0.6 (cid:2)1.5 (cid:2)0.5 (cid:2)1.2 Previous (per cento) Latest (per cento) Difference (percentage point) — — — — — — (cid:2)1.2 — — — — — — — — — — — — — — (cid:2)2.0 — — — (cid:2)1.5 — — — — — — — — — — (cid:2)0.8 — — — — — — — — Source: Compiled by the Hong Kong Monetary Authority. Available at www.info.gov.hk/hkma Tourism-related activities constitute an important part of the export and import of services in Hong Kong. In 2002, exports of transportation and travel services amounted to 8.2 percent and 4.7 percent of Hong Kong’s GDP, rispettivamente, and im- ports of transportation and travel services were 4.1 percent and 7.7 per cento, respec- tively. The net effect of a widespread, lengthy SARS outbreak in Hong Kong would have been a decrease in GDP, with the hotel, airline, and retail sectors suffering more than other services. Hong Kong’s exports of goods are dominated by re-exports and amount to roughly 10 times its domestic exports. Most of the re-exports are goods manufactured across the border in mainland China, in the Pearl River Delta area. In 2002, total imports and exports of goods and services in Hong Kong was 293 percent of GDP, as Hong Kong is the business center from which a vast regional cross-border manufacturing production base is managed. A recent study by the Hong Kong Centre for Economic Research (2003) estimates that 43 percent of the Hong Kong labor force in 2001 was either directly or indirectly engaged in managing and supporting this production base. Although net exports in 2002 were only 8.3 percent of GDP, Hong Kong’s func- tion as a trading hub, questo è, its role in the management, ªnancing, and transporta- tion within this regional export-oriented cross-border manufacturing base, would have been seriously disrupted if the SARS outbreak in China had paralyzed parts of the global supply chains. The impact on GDP and employment would have been se- vere for Hong Kong. During the outbreak, analysts were concerned that if the dis- ease were not quickly contained, then Hong Kong would suffer long-term conse- 69 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / d i r e c t . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 3 1 6 2 1 6 8 8 2 7 5 1 5 3 5 3 5 1 0 4 1 7 4 7 9 9 6 p d . f b y g u e s t t o n 0 8 S e p e m b e r 2 0 2 3 Economic Impact of SARS in Hong Kong Table 5. Structure of the Hong Kong economy (2000–2002) Private consumption expenditure Government consumption expenditure Gross domestic ªxed-capital formation Changes in inventories Exports of goods and services Goods Domestic exports Re-exports Services Transportation Travel Trade-related services Others Imports of goods and services Goods Services Transportation Travel Trade-related services Others Gross domestic product Value in 2002 (HK$ billion)

728.4
131.2
292.6
2.4
1,900.1
1,562.1
131.1
1,431.0
337.9
103.0
58.8
117.2
58.9
1,794.9
1,601.5
193.4
51.7
96.8
12.1
32.8
1,259.8

Share of GDP (%)

2002

57.8
10.4
23.2
0.2
150.8
124.0
10.4
113.6
26.8
8.2
4.7
9.3
4.7
142.5
127.1
15.4
4.1
7.7
1.0
2.6
100.0

2001

60.2
10.1
26.2
(cid:2)0.3
140.8
116.6
12.1
104.5
24.2
7.4
3.7
8.4
4.8
137.1
122.0
15.2
4.0
7.6
0.9
2.7
100.0

2000

57.8
9.3
27.0
1.1
146.7
122.1
14.0
108.0
24.7
7.7
4.8
7.6
4.6
141.9
127.0
14.9
3.8
7.6
0.9
2.7
100.0

Fonte: Census and Statistics Department, Hong Kong (2003B).

quences from the diversion of foreign investments from the region. Many analysts
were also concerned that the disease might recur in 2004.

The SARS outbreak was an unexpected negative shock to Hong Kong’s economy.
The most signiªcant negative effects were on the demand side. Local consumption
and the export of services related to tourism and air travel were severely affected in
the short run. Early anecdotal evidence reported in the press indicated that restau-
rants and retail outlets were hit hard, with sales dropping by 10 A 50 per cento
(table 6). Land transport declined by 10–20 percent because people stayed home.
There was also a 50 percent drop in the use of the Airport Express Line,1 which indi-
cated a reduction in air travel. Fortunately, the supply side of Hong Kong’s econ-
omy was unaffected. Even though SARS raged through the province of Guangdong,
the cross-border manufacturing base was not disrupted. The production and cross-
border movement of goods continued to function smoothly, and the global supply
chains remained intact.

The stock market reaction to the SARS outbreak was relatively moderate. The Hong
Kong Hang Seng Index dropped only by 1.78 percent between 12 Marzo (Quando
WHO raised the global alert) E 30 April. Other major market indexes rose over
the same period, except for the Taiwan Weighted Index and Japan’s Nikkei 225

1 The Airport Express Line offers a fast passenger railway link between Chek Lap Kok (Dove

Hong Kong International Airport is located) and central Hong Kong.

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Economic Impact of SARS in Hong Kong

Tavolo 6. Anecdotal evidence of losses from SARS according to selected businesses
(all dates 2003)

Sector

Fonte

Date

Reported loss

Mid-April

50 restaurants closed temporarily

Food and catering

Retail

Hong Kong Federation of
Restaurants and Related Trades
Café de Coral

Hong Kong Retail Management
Association
Sa Sa International
Giordano International
Mirabell International

Tourism

Hong Kong Tourism Board

Early April

Early April
Mid-April
Mid-April

Early April

Airline

Cathay Paciªc Airways

Mid-April

Transport

Others

Dragon Airlines

Citybus
New World First Bus
MTR Corporation

Mid-April

Early April
Mid-April
Mid-April

The Hong Kong Convention and
Exhibition Centre
Cinema Association

Early April

Mid-April

Sales dropped by 20%

Retail sales fell by 50%

Sales dropped by 10%
Sales dropped by 30%
Sales fell by 50% from a year prior

10.4% drop in visitor arrivals in
the last 16 days of March over a
year prior

Estimated loss per day was US$3 million; cancellation of ºights rose from 10% in late March to over 40% in mid-April Flight schedule was cut by 48% Passenger level fell by 10% Passenger level fell by 20% Airport Express Line frequency was cut as passenger levels fell by 50% 12% of bookings were cancelled or postponed Revenue in March dropped by 47% Sources: Various press reports from Ming Pao (www.mingpaonews.com) and South China Morning Post (www.scmp.com). (table 7). The Hong Kong market surged ahead by 3.7 percent on 29 April, after WHO announced that the worst of the SARS outbreak appeared to be over in Singa- pore, Hong Kong, Canada, and Vietnam. Stock shares of airlines, hotels, property developers, and retailers performed worse than the whole market, whereas shares of export-oriented companies did relatively well (table 8). 4.2 Impact on local consumption The decline in local consumer spending in Hong Kong stemmed from fears that the disease had spread to the community at large. Consequently, people refrained from many consumption activities outside their homes. The drop in demand rippled through the whole economy: it affected other sectors, put further downward pres- sure on the price level, and worsened the unemployment problem. The SARS shock started to bite only in late March 2003, based on the March retail sales ªgure, which was HK$14.17 billion, UN 6.1 percent drop from the previous year (table 9). Retail
sales in April declined 15.2 percent from the previous year. As the number of new
SARS cases started to decline in late April, local residents began venturing out more
often. On 1 May, the Labor Day holiday, queues were seen outside some restaurants
and cinemas. The consumption pattern also adjusted, with supermarkets and video
rental shops doing more business. Retail sales began to recover steadily after

Asian Economic Papers

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Economic Impact of SARS in Hong Kong

Tavolo 9. Retail sales data for Hong Kong (2003)

Total retail sales

Value
(HK$ billion) Year-on-year percentage change 17.48 12.68 14.17 12.72 13.78 13.60 14.63 14.72 9.87 (cid:2)12.56 (cid:2)6.06 (cid:2)15.15 (cid:2)11.13 (cid:2)6.46 (cid:2)2.49 1.16 2003 January February March April May June July August Unit price index (year-on-year percentage change) (cid:2)1.71 (cid:2)1.46 (cid:2)2.43 (cid:2)3.28 (cid:2)3.95 (cid:2)3.31 (cid:2)2.19 (cid:2)1.68 Volume index (year-on-year percentage change) 11.76 (cid:2)11.23 (cid:2)3.73 (cid:2)12.24 (cid:2)7.45 (cid:2)3.31 (cid:2)0.30 2.91 Fonte: Census and Statistics Department, Hong Kong SAR Government. Available at www.info.gov.hk/censtatd/eng/hkstat/fas /commerce/retail/retail_index.html May 2003 as the SARS outbreak receded, and reached their pre-outbreak levels by the end of July. 4.3 Impact on tourism and travel During the second half of March 2003, visitor arrivals dropped by 10.4 per cento, com- pared with arrivals in the previous year, and airlines had to cancel ºights. As shown in ªgure 3, air passenger travel to and from Hong Kong began to drop in mid-March and fell sharply at the end of the month, several days before the WHO travel warn- ing. The spike during the Easter holidays was a result of local residents’ taking tours outside Hong Kong. The amount of aircraft movement began to drop after the end of March and reached bottom in early May (ªgure 4). By the end of July, the number of ºights had nearly recovered to the level seen in March. Tavolo 10 shows the number of passenger arrivals and departures by mode of travel for visitors and residents in Hong Kong. In April 2003 visitor arrivals dropped in all three modes of travel, compared with the March 2003 ªgures: the number of airline passengers fell by 77 per cento, the number of people traveling by land declined by 52 per cento, and the number that came by sea dropped by 72 per cento. On average, be- tween March and April 2003 the total number of visitors arriving in Hong Kong fell by 63 per cento (around 850,000). The decline in travel by residents was considerably less drastic, with a decrease in the total number of around 26 percent in April month-on-month. In June, visitor arrivals started to recover and by August they had returned to their original levels. Residents’ travel recovered about a month sooner. (See table 10 and ªgures 5 E 6.) As the SARS outbreak came under control, the number of visitors to Hong Kong picked up. On average, between 1997 E 2002 only around half of the visitors to Hong Kong were tourists: 30 percent were business travelers and 10 percent were 74 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / d i r e c t . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 3 1 6 2 1 6 8 8 2 7 5 1 5 3 5 3 5 1 0 4 1 7 4 7 9 9 6 p d . f b y g u e s t t o n 0 8 S e p e m b e r 2 0 2 3 Economic Impact of SARS in Hong Kong Figure 3. Number of arriving and departing air passengers in Hong Kong (1 Marzo 2003 A 31 agosto 2003) Fonte: Unpublished daily data provided by Immigration Department, Hong Kong SAR Government. Available at www.immd.gov.hk Figure 4. Aircraft movement at the Hong Kong International Airport (1 Marzo 2003 A 31 agosto 2003) Fonte: Unpublished daily data provided by Airport Authority Hong Kong. Available at www.hongkongairport.com 75 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / d i r e c t . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 3 1 6 2 1 6 8 8 2 7 5 1 5 3 5 3 5 1 0 4 1 7 4 7 9 9 6 p d . f b y g u e s t t o n 0 8 S e p e m b e r 2 0 2 3 Economic Impact of SARS in Hong Kong 3 0 0 2 t s u g u A 3 0 0 2 y l u J 3 0 0 2 e n u J 3 0 0 2 y a M 3 0 0 2 l i r p A 3 0 0 2 h c r a M 3 0 0 2 y r a u r b e F 3 0 0 2 y r a u n a J ) 3 0 0 2 t s u g u A – y r a u n a J ( g n o K g n o H n i a e s d n a , d n a l , r i a y b s r e g n e s s a p g n i t r a p e d d n a g n i v i r r a f o r e b m u N . 0 1 e l b a T 4 7 6 , 4 0 1 , 1 9 3 8 , 5 9 8 8 0 7 , 5 4 4 , 7 8 0 6 2 9 7 , , 6 7 2 1 0 7 6 , , 4 7 3 0 3 4 5 , , 5 8 1 0 8 7 5 , , 9 6 6 1 0 0 5 , , 0 4 2 5 3 3 4 , , 8 2 2 1 4 0 1 , 9 6 0 1 7 7 , , 7 1 2 2 , 3 2 0 , 1 , 2 0 1 2 0 6 5 , 8 6 7 3 0 8 , 9 3 8 , 9 8 8 2 0 9 2 9 6 , , 6 6 2 4 9 4 6 , 5 9 4 7 4 4 , , 5 1 1 0 2 4 , 5 , 4 5 3 4 5 9 4 , , 6 2 6 4 0 3 4 , , 6 4 7 5 4 1 1 , 2 0 6 , 1 9 4 9 9 7 , 2 8 8 7 7 4 , 0 7 2 8 7 8 , 4 4 6 , 1 , 0 1 6 7 8 0 6 , 9 0 7 8 4 8 , 2 8 1 , 4 0 4 8 5 1 , 7 0 7 8 8 4 , 0 8 1 8 2 8 , 1 9 2 , 1 4 9 9 7 6 6 , 6 3 2 5 2 7 , 8 4 5 , 2 5 1 1 9 3 , 4 6 4 7 9 2 8 0 1 , , 4 9 8 9 7 4 5 , , 1 8 6 8 1 7 4 , 5 0 5 , 6 3 3 , 4 8 2 3 , 1 1 2 5 2 3 , 0 6 4 2 5 8 , 4 6 6 , 3 4 7 3 , 3 4 3 , 4 6 2 3 , 4 1 2 6 4 1 , 2 7 4 2 0 9 , 6 5 6 , 3 2 9 7 , 6 5 4 5 2 , 7 2 4 1 1 7 , 7 1 3 1 5 7 , 2 5 3 8 2 , 3 4 1 , 4 7 5 7 , 8 7 2 4 3 6 , 7 4 4 2 9 8 , 6 1 4 , 3 4 8 5 , 7 3 2 , 4 5 2 1 , 2 3 3 8 6 8 , 0 9 4 1 9 5 , 4 1 4 , 3 6 6 6 , 3 9 4 5 5 5 , 6 0 1 5 6 4 , 4 3 3 6 4 6 , 2 5 7 0 5 , 4 2 9 , 3 4 2 5 , 2 0 7 , 3 0 6 8 , 6 1 3 , 6 4 6 7 , 1 0 8 6 0 6 , 6 0 7 0 9 4 , 8 0 8 , 4 7 5 8 , 5 8 3 , 6 2 7 1 , 3 5 8 3 3 4 , 1 0 8 2 5 2 , 1 3 7 , 4 6 8 3 , 7 4 3 , 1 4 1 4 , 4 6 4 9 0 9 , 3 9 6 3 6 0 , 9 8 1 5 1 3 , 3 9 9 , 4 8 2 6 , 8 5 7 , 6 9 6 1 , 9 1 0 , 1 2 0 0 , 0 3 8 , 4 7 5 4 , 9 0 9 4 2 5 , 1 9 1 , 6 5 2 4 , 3 4 8 8 2 3 , 2 3 9 1 7 7 , 5 1 4 , 4 9 3 1 , 8 0 4 , 1 0 9 4 , 6 4 5 8 4 9 , 0 4 6 1 0 7 , 0 2 2 6 8 8 , 3 0 8 , 4 0 0 3 , 4 0 6 , 6 9 6 3 , 9 8 8 6 5 3 , 9 6 9 , 4 5 7 5 , 5 4 7 9 2 1 , 3 9 0 , 7 1 1 3 , 2 3 0 , 1 2 9 1 , 0 1 2 , 5 6 2 6 , 0 5 8 8 7 9 , 5 4 5 , 1 4 0 9 , 8 3 5 4 9 2 , 8 7 7 0 8 7 , 8 2 2 s l a v i r r a r e g n e s s a P d n a L a e S r i A s e r u t r a p e d r e g n e s s a P s l a v i r r a r o t i s i V d n a L a e S r i A d n a L a e S r i A 8 7 9 , 7 8 4 , 5 s e r u t r a p e d t n e d i s e R m o c . a t a d c i e c . w w w t a e l b a l i a v A . d t L y n a p m o C a t a D C I E C y b d e h s i l b u P . a t a D C I E C : e c r u o S 76 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / d i r e c t . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 3 1 6 2 1 6 8 8 2 7 5 1 5 3 5 3 5 1 0 4 1 7 4 7 9 9 6 p d . f b y g u e s t t o n 0 8 S e p e m b e r 2 0 2 3 Economic Impact of SARS in Hong Kong Figure 5. Number of visitors arriving in Hong Kong (agosto 2002 to August 2003) Fonte: Census and Statistics Department, Hong Kong (2003D). Figura 6. Number of departing Hong Kong residents (agosto 2002 to August 2003) Fonte: Census and Statistics Department, Hong Kong (2003D). 77 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / d i r e c t . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 3 1 6 2 1 6 8 8 2 7 5 1 5 3 5 3 5 1 0 4 1 7 4 7 9 9 6 p d . f b y g u e s t t o n 0 8 S e p e m b e r 2 0 2 3 Economic Impact of SARS in Hong Kong Table 11. Purpose of visit and average length of stay of visitors to Hong Kong (1997–2002) Purpose of visit Vacation Business/meetings Visiting friends and relatives En route Other purposes Average length of stay (nights) 1997 61% 26% 7% 5% 2% 3.6 1998 49% 32% 9% 8% 1% 3.4 1999 49% 30% 12% 7% 2% 3.4 2000 55% 30% 8% 6% 1% 3.0 2001 50% 30% 10% 9% 2% 3.1 2002 47% 32% 14% 7% 0% 3.6 Sources: Census and Statistics Department, Hong Kong (2003UN) and Hong Kong Tourism Board (2003). those visiting friends or relatives (table 11). The number of visitors in the latter two groups recovered more quickly than the number of tourist visitors. The occupancy rate in Hong Kong’s hotels dropped dramatically from around 79 percent in early March to 18 percent in early May, but by early July the rate had recovered to 71 per- cent (ªgure 7). The depressed state of Hong Kong’s domestic demand since 1999 was partially off- set by increased demand by tourists. Total spending by tourists had dropped off dramatically between 1997 E 1998, at the onset of the Asian ªnancial crisis (table 12), but since then it has grown at an average annual rate of 8 per cento, largely be- cause of the increasing number of visitors from mainland China resulting from the more relaxed restrictions on travel to Hong Kong.2 The most up-to-date ªgure for total tourism expenditure associated with inbound tourism in Hong Kong is HK$77.4 billion in 2002, which amounts to 6 percent of GDP. The impact of tourist
spending on the value of retail sales is, Tuttavia, quite substantial. The average
spending by each overnight tourist in 2001 was HK$4,588, and this spending in- creased to HK$4,904 in 2002. A drop of 850,000 visitors in April 2003 translates to a
reduction of HK$4.2 billion of spending in the domestic consumption market, io sono- plying that retail sales probably fell by around HK$2.0 billion in April, O 14 per cento
of the value of retail sales in March.

4.4 Impact on exports and re-exports of goods
The fear that the SARS outbreak would cause a fall in Hong Kong’s goods exports
and re-exports was not borne out: cross-border truck trafªc ªgures showed no obvi-
ous decrease between March and September 2003 (ªgure 8). Evidently the produc-
tion and movement of goods continued unperturbed during the outbreak. The trade
ªgures for exports of goods continued to grow robustly between January and

2 Under the Individual Visit Scheme commenced on 28 Luglio 2003, residents of four Guangdong
cities could travel to Hong Kong as individual visitors. Previously, they had to join a tour
group to visit Hong Kong. The scheme was introduced by the Chinese government as a
measure to revive Hong Kong’s economy and was subsequently extended to Beijing, Shang-
hai, and the whole of Guangdong province. Beijing’s policy is to extend the scheme further
by including more cities.

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Economic Impact of SARS in Hong Kong

Figura 7. Hotel occupancy rates in Hong Kong (January–August 2003)

Fonte: Census and Statistics Department, Hong Kong (2003D).

Tavolo 12. Visitor spending in Hong Kong (1992–2002)

Year

1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002

Total visitor spend-
ing (HK$ billion) Per capita visitor spending (HK$)

46.70
58.30
62.51
72.94
91.49
75.70
56.83
56.99
63.91
61.80
77.41

6,684
6,684
6,699
7,151
7,052
6,715
5,490
4,897
4,612
4,588
4,904

Sources: Census and Statistics Department, Hong Kong (2003UN) and Hong Kong Tourism Board (2003).

Note: Figures for 1998–2002 are new data on “total tourism expenditure associated with inbound tourism” and “overnight visitor per

capita spending” released by the Hong Kong Tourism Board in November 2003.

Giugno 2003. For the ªrst and second quarters of 2003, the value of the total exports of
goods from Hong Kong rose by 17.6 percent and 12.2 per cento, rispettivamente, com-
pared with the values in the same period of 2002. The value of re-exports surged by
20.3 percent in 2003:Q1 and by 14.4 percent in 2003:Q2, and the value of domestic
exports decreased by 10.4 percent in 2003:Q1 and 11.3 percent in 2003:Q2. The value

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Figura 8. Cross-border truck trafªc—Lok Ma Chau (1 Marzo 2003 A 8 settembre 2003)

Fonte: Unpublished daily data provided by Customs and Excise Department, Hong Kong SAR Government. Available at

www.info.gov.hk/customs

of imports of goods increased in 2003:Q1 and 2003:Q2 by 18.0 percent and 10.0 per-
cent, rispettivamente, resulting in a trade deªcit of HK$16.0 billion and HK$9.8 billion
for these periods. Così, the external trade sector performed quite well during the
worst period of the SARS outbreak.

No major production disruptions were reported in factories in the Pearl River Delta,
which are mostly owned by Hong Kong–based manufacturing and trading compa-
nies. Most factory hands employed in the manufacturing operations in this area are
migrant workers who live in employer-provided hostels. This arrangement proba-
bly helped to insulate these workers from SARS in the nearby community. The ef-
fects of the curtailment of travel to the region by employees of overseas companies
was mitigated by the return of business travelers after the SARS outbreak was over
and by the increased level of travel by local businessmen to meet with their overseas
clients.

4.5 Impacts on unemployment and deºation
The combined effects of the drop in domestic consumption and the decrease in tour-
ist spending worsened what was already a weak labor market in Hong Kong. E-
employment and underemployment rates rose throughout the SARS outbreak
(table 13). Many severely affected sectors either laid off workers or undertook work-

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Economic Impact of SARS in Hong Kong

Tavolo 13. Unemployment and underemployment in Hong Kong (2003)

Unemployment

Underemployment

Average for 3-month
period ending in:

Persons
(thousands)

Rate
(%, seasonally adjusted)

Persons
(thousands)

Rate (%)

Gennaio
Febbraio
Marzo
April
May
Giugno
Luglio
agosto

246
256
260
274
287
300
309
309

7.2
7.4
7.5
7.8
8.3
8.6
8.7
8.6

108
101
101
113
135
151
149
142

3.1
2.9
2.9
3.2
3.8
4.3
4.2
4.0

Fonte: Census and Statistics Department, Hong Kong SAR Government. Available at www.info.gov.hk/censtatd/eng/hkstat/fas/

labour/ghs/labour1_index.html

sharing schemes in the face of lower demand. The underemployment rate started to
decrease in July, and the unemployment rate showed signs of falling in August.

The consumer price index continued to show a negative growth rate throughout the
SARS outbreak (table 14). The declines were more severe after the SARS outbreak
had started to abate, reºecting attempts by retailers, restaurants, and others to entice
consumers to spend.

5. Concluding remarks

The initial alarmist reports and estimates about the impacts of SARS have not been
borne out by the actual statistics. The economic impacts of SARS on consumption,
tourism, and travel-related services turned out to be relatively short-lived. Fear and
panic subsided quickly once the outbreak abated. The stock market’s overall re-
sponse mirrored these developments well: most of the short-term negative effects
were concentrated in sectors that were severely hit by the negative demand shock.
There was no major disruption to external trade, especially for the re-exporting of
goods from mainland China. The manufacturing base in the Pearl River Delta was
unaffected, and goods continued to ºow through Hong Kong normally. The Hong
Kong economy did not experience a supply-side shock. We ªnd no anecdotal evi-
dence to indicate that SARS had negative effects on either domestic or foreign in-
vestment.

The possibility that the virus will return in 2004 cannot be ruled out. Mainland
China and Hong Kong will be much better prepared, Tuttavia, especially with the
knowledge that the virus is not airborne and can therefore be contained if quaran-
tine measures are quickly and meticulously implemented. The spread of the disease

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Tavolo 14. Composite consumer price index in Hong Kong (2003)

Month

Gennaio
Febbraio
Marzo
April
May
Giugno
Luglio
agosto

Composite consumer price index

93.7
93.5
93.7
93.7
92.7
92.0
91.1
91.0

Year-on-year percentage change
(cid:2)1.6
(cid:2)2.0
(cid:2)2.1
(cid:2)1.8
(cid:2)2.5
(cid:2)3.1
(cid:2)4.0
(cid:2)3.8

Fonte: Census and Statistics Department, Hong Kong SAR Government. Available at www.info.gov.hk/censtatd/eng/hkstat/fas/cpi/

cpi_std_index.html

in hospitals is likely to be better handled, with enhanced infection isolation facilities,
infection control procedures, and heightened vigilance.

The fact that the disease raged on for several months without attracting worldwide
attention reveals the damaging effects of information control in relatively closed so-
cieties that do not have a free press. The spread of SARS to Hong Kong, with the
ªrst case in a hotel, was very unfortunate, but it may also have been critical in focus-
ing public attention on the potential global threat posed by the virus. The media in
Hong Kong were the ªrst to raise public alarm by candidly reporting the facts. IL
spread of the disease to several countries (notably Vietnam, Singapore, and Canada)
brought world attention to the issues that SARS was a deadly new disease and was
spreading quickly, and that authorities in mainland China had failed to report in a
timely manner a serious epidemic. The free ºow of information and the reactions
that followed played an important role in stopping the spread of the disease. IL
Chinese government responded quickly to contain the spread of SARS in the wake
of international public pressure. Research that led to the early identiªcation of the
virus at The University of Hong Kong and of some of the properties of the disease
calmed the public’s fears and may have helped avert an uncontrolled panic by in-
vestors and the serious economic impacts that would have followed.

If a recurrence of the disease is controlled effectively, then Hong Kong’s close eco-
nomic relationship with the mainland will not be affected by such a recurrence. An-
other SARS outbreak could even help to speed up the opening of the mainland, for
the ªrst experience demonstrated to the Chinese leadership that GDP numbers de-
pend on the conªdence of domestic and international economic agents. Any such
further opening will enhance Hong Kong’s role in China’s development. Infatti, IL
lifting of restrictions on travel to Hong Kong for residents of Guangdong, Shanghai,
and Beijing permitted by the Individual Visit Scheme is likely to increase the ºow of
information between Hong Kong and mainland China. The recent signing of the
Closer Economic Partnership Arrangement confers greater freedom for many

Asian Economic Papers

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Economic Impact of SARS in Hong Kong

Hong Kong service providers to access the market in mainland China, and it is
likely to contribute to China’s further opening up and integration with the rest of
the world.

Riferimenti

Census and Statistics Department, Hong Kong. 2003UN. Statistical Digest of the Services Sector
2003. Hong Kong: Publications Unit of the Census and Statistics Department.

———. 2003B. Gross Domestic Product, Third Quarter 2003. Hong Kong: Publications Unit of the
Census and Statistics Department.

———. 2003C. Hong Kong Annual Digest of Statistics 2003. Hong Kong: Publications Unit of the
Census and Statistics Department.

———. 2003D. Hong Kong Monthly Digest of Statistics, ottobre 2003. Hong Kong: Publications
Unit of the Census and Statistics Department.

Hong Kong Centre for Economic Research. 2003. Made in PRD: The Changing Face of HK Manu-
facturers. Hong Kong: Hong Kong Centre for Economic Research, The University of Hong
Kong.

Hong Kong Tourism Board. 2003. A Statistical Review of Hong Kong Tourism 2002. Hong Kong:
Tourism Research Hong Kong Tourism Board. Available at http://www.partnernet.hktb.com

SARS Expert Committee. 2003. SARS in Hong Kong: From Experience to Action. Report of the
SARS Expert Committee, ottobre 2003. Available at http://www.sars-expertcom.gov.hk

World Bank. 2003. East Asia Update: Looking beyond Short-Term Shocks, April 2003. Washington,
D.C.: World Bank.

Asian Economic Papers

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