BASEL (Switzerland), May 12: Central bankers on Monday played down the likely impact of the outbreak of Sars on Asian economies and said they could see the first buds of a slow global economic recovery following the end of the conflict in Iraq.
Eddie George, governor of the Bank of England, said after a regular meeting of central bank chiefs at the Bank for International Settlements (BIS) here that the economic impact of the new disease was confined mainly to the tourism and travel industry.
Mr George, who is also spokesman for the G10 group of central bankers from industrialised countries, insisted that it was unlikely that the growth of the Chinese economy could be knocked off course by the uncertainty triggered by the outbreak of Severe Acute Respiratory Syndrome (Sars).
China had a growth rate if 10 per cent of GDP in the first quarter of 2003. “It was not discouraging,” Mr George commented after hearing news from some Asian central banks during the meeting.
“The sense around the table was that the ... damage will be limited to some sectors,” the central banker said.
Central bank officials from countries affected by Sars, such as China, Singapore and Hong Kong, did not travel to BIS headquarters.
The BIS meeting, which traditionally takes stock of global economic developments every two months, also found first signs of an economic upturn following the end of the conflict in Iraq.
“There are signs in financial markets and in the consumer mood that there is something like recovery,” Mr George said, observing that oil markets had also stabilised.
Yet he voiced caution, warning that it was not yet clear how much of the recent weakness in major economies was due to Iraq.
The central banker blamed “sluggish” business activity in the 12 nation euro-zone for maintaining a prediction of growth of one per cent or less in the region for 2003, with a recovery only taking hold in western Europe next year.
The meeting also forecast “three per cent plus” growth in the US economy, while Argentina and Brazil were showing noticeable improvement.
Consumer demand in Japan remained “flat”, according to Mr George.
The central bankers’ upbeat assessment on Sars and its impact on the hardest hit countries in Asia follows similar statements from the International Monetary Fund (IMF) last week.
But it also contrasts sharply with several comments from governments and economic institutions in Asia.
On Monday, a Taiwanese newspaper reported that an economics ministry survey showed that the country’s export orders could be slashed by $1.15 billion this year because of the outbreak of Sars.
The Asian Development Bank (ADB) warned last week that East Asia could lose nearly $28 billion in income and output if the region fails to control Sars by September, with Hong Kong was likely to be the worst hit.—AFP