The Economic Impact of SARS
CBC News Online | Updated July 8, 2003
Toronto businesses were hit hard by SARS, says Joe Mihevc, Toronto city councillor and chair of the city's health board. "We are talking... millions of dollars in lost potential (economic activity)," he told CBC Newsworld on April 20.
Severe acute respiratory syndrome (SARS) was taking a devastating toll on the tourism sector even before the World Health Organization released its advisory against non-essential travel to Toronto. The advisory is making a bad situation worse.
The City of Toronto put together a plan to deal with the economic consequences of SARS and Toronto Mayor Mel Lastman asked banks to help residents and businesses affected by the disease. Some banks had already planned to help. The Royal Bank, for example, looked into a program to help clients by deferring payments such as it did during the Quebec ice storm and the Manitoba flood in the 1990s. Other banks considered similar plans.
- cancellations at Greater Toronto Area hotels led to an estimated $39 million in lost revenues during the month of April 2003 alone (Source: Canadian Tourism Commission)
- audiences at theatres dwindled
- bus and tour companies were hit more than 800 bus tours were cancelled as of April 24, with an estimated economic loss of $5 million to $6 million*
- fewer people were dining at restaurants restaurant business was down between 20 and 30 per cent, according to economic development commissioner Joe Halstead*
- conventions were cancelled the cancellation of one health-care convention probably cost the region about $6 million, according to Ontario Enterprise Minister Jim Flaherty
According to the Canadian Tourism Association, cancellations attributed to SARS have cost Ontario hoteliers $60 million in the month of April 2003 alone.
In June, Ontario continued to press for more federal funds by presenting Ottawa with a detailed breakdown of the cost of the SARS outbreak.
Ontario Health Minister Tony Clement estimated that, as of June 27, 2003, SARS had cost that province's health-care system $945 million. Driving up the cost are special supplies needed to protect health-care workers as well as expenditures associated with constructing specialized SARS clinics and isolation rooms.
Ontario Municipal Affairs Minister David Young says SARS should have received "an immediate and meaningful" response from Ottawa. The federal government offered $150 million in aid and said it would negotiate another $100 million, but Young called that "paltry."
Young and Clement want Ottawa to pay 90 per cent of the cost of SARS under disaster relief legislation. They say the SARS outbreak should be given aid equivalent to other emergencies, such as the Manitoba flood or the Quebec ice storm.
Federal disaster relief began flowing within 10 days of the ice storm - "before the ice had melted," says Young, and Ontario should get the same treatment. "Ontarians are not second-class citizens."
In April 2003, when the cost of SARS only pegged at $84 million, the Ontario government put together an economic recovery plan to help Toronto businesses.
Premier Ernie also promised that people in Ontario who lost wages due to SARS quarantine would be fully compensated. The plan included people who don't get help from benefit plans or federal employment insurance, or people who are self-employed without benefits. Front-line health-care workers who lost wages would also get compensation.
As well, Ontario announced it would give Toronto-area hospitals $25 million to help deal with surgical backlogs due to SARS, and launch a $10-million ad campaign promoting Toronto once the outbreak is over.
The Canadian Tourism Commission studied the combined impact of SARS and the Iraq war on the Canadian economy. It estimated SARS will cost the Canadian economy $519 million in 2003 alone and $722 million between 2003 and 2006. It says Canada lost 662,000 occupied room nights in the month of April 2003 - translating into an estimated $92-million loss of revenue.
The CTC estimates the bleak picture is the same for the tourism job sector, where losses are estimated at 5,300 for 2003, with 7,350 jobs lost between 2003 and 2006.
Both Bank of Canada Governor David Dodge and federal Finance Minister John Manley have said it's too early to tell how badly SARS will affect the Canadian economy.
"Obviously, growth in the second quarter will be somewhat weaker than what we had projected because what we have in our report does not take any potential impact of SARS into account," Dodge said in April 2003. The report, which projects 2.5 per cent growth in the first three quarters of the year, was written before the WHO warning against non-essential travel to Toronto.
"We are seeing a slower rate of growth than we had forecast at the time of the budget," Manley told reporters on April 23. "We're seeing continuing softness in the U.S. economy and one is hopeful as some of the uncertainty declines we'll see a pickup in growth later in the year."
But J.P. Morgan economist Ted Carmichael put a number on it. He dropped his economic forecast for the second quarter by between one and 1.5 percentage points (which puts his growth projection for the quarter at one per cent). He said hospitality and tourism would be the hardest-hit sectors.
On April 25, Prime Minister Jean Chr�tien announced the federal government would contribute $10 million to an ad campaign to promote Toronto.
On May 2, the federal government pledged "a minimum" of $100 million to help fight SARS. The money will be used in the field of healthcare and to help with the "non-medical consequences" of SARS, such financial assistance for those quarantined and to promote tourism.
On April 24, The Organization for Economic Co-operation and Development (OECD) said SARS could have a significant impact on the tourism and retail sectors in the most-seriously affected countries, if the emergency continues or gets worse.
The World Bank said SARS was a factor in the cut of 0.5 percentage points in its forecast for economic growth in East Asia, where it now projects five per cent growth this year. SARS is blamed for a drop in stock prices and revenues for airlines, tourism and retailers in several Asian countries, according to the OECD.
Many Asian countries have announced financial aid to help soften the effects of SARS. Singapore announced it would spend $129 million to help its tourism and transport sectors. Malaysia has asked banks and utilities to cut costs for corporate customers. And Hong Kong has a $1.5-billion relief plan, which includes tax breaks, guaranteed loans and short-term janitorial jobs to disinfect disease victims' homes.
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