The outbreak of the Severe Acute Respiratory Syndrome (SARS) will curb GDP growth in most economies in Asia this year, Standard & Poor's (S&P) said this morning.
Hong Kong is likely to be the hardest hit, S&P said. However, sovereign ratings should not be affected although the impact of the virus will add to governments' fiscal burdens, the ratings agency said in a statement.
Within Asia, the virus has affected not just tourist arrivals and consumer spending, but also business operations and investments, with the potential impact rising with each fresh case and new reported death, S&P said.
Although SARS does not appear to be as deadly as other diseases, it is affecting the way people are interacting, with many choosing to avoid public places. This in turn is harming confidence and consumption.
"If the virus proves more virulent than initial estimates, economic dislocation and sustained budgetary deterioration could put pressure on sovereigns whose fiscal position is stretched for their rating level, especially those with negative outlooks, including Hong Kong," S&P said.
Under S&P's current base-case scenario that the virus will be ultimately controlled, the effects and damage to the real economy, public finance, and public health, is likely to be short-lived, and underlying credit fundamentals should remain unchanged.
Sovereigns with stronger fiscal flexibility will cope with the impact but are likely to endure the temporary set backs.
AFP