COVID-19 vs. SARS: Impacts and Prospects for Recovery

The novel coronavirus disease (COVID-19), which first emerged in late 2019, has become a global pandemic. It affects the global economy in all aspects and shows no signs of ending. COVID-19 also reminds us of the 2003 SARS pandemic: originating in China, along with having a great effect on the world economy. So where are those two different pandemics and what can governments learn from the SARS pandemic to revive the economy after COVID-19?

Is COVID-19 the same as SARS?

SARS is a respiratory illness in humans caused by a virus called SARS-CoV. This is a strain of the corona virus and is identified as being derived from civet. SARS appeared in November 2002 and has infected individuals in 26 countries around the world over a period of several months. Like COVID-19, it appears to have originated in animal markets. The SARS virus was prevented relatively quickly, eventually infecting about 8,500 people with a death rate of about 10%.

Meanwhile, the pandemic COVID-19 virus is also a strain of the coronavirus, called SARS-CoV-2, originating from bats. The first viral infections were recorded in December 2019 and were linked to the Hainan Seafood Market in Wuhan, China. Unlike SARS, COVID-19 has spread to almost every country to date. By late March 2020, the US had the largest number of cases, while the disease showed signs of receding in the PRC. Other countries that suffered large outbreaks included France, Germany, Iran, Italy, the Republic of Korea, Spain, Switzerland, the United Kingdom, and caseloads have been on the rise in Japan and in most developing countries worldwide, where testing is substantially less widespread. The difference is partly due to the highly infectious nature of COVID-19 and partly due to closer links between countries. COVID-19 has not yet run its full course and its future epidemiological trajectory is highly uncertain. What is certain is that it is exacting a far heavier toll on global public health than its earlier coronavirus cousin SARS.

Compare the effects of the two pandemics with the economy

Because of the difference in the extent and scale of the spread, the impact of these two pandemics is also markedly different.

First of all, the SARS epidemic appeared at a time when the real estate market was in a recession, different from the current COVID-19 when the real estate market was on the rise. This could cause large-scale economic disruptions.

The global macroeconomic impact of SARS is estimated at $ 30–100 billion or about $ 3–10 million per case. The 2003 SARS outbreak caused $ 12.3-28.4 billion in damage and an estimated 1% decrease in GDP in China and 0.5% in Southeast Asia. The social burden of SARS in Guangzhou means less income and expenditure, with preliminary estimates of the total economic burden of 11 billion yuan.

However, those numbers are nothing compared to what COVID-19 caused. According to experts, it is too early to assess the consequences of COVID-19 on the global economy. Many economic experts have given estimates of the economic losses the world may suffer, though these are only relative numbers because the epidemic has no signs of stopping.

Talking about the effects of the current outbreak of COVID-19 pandemic, economic professor Warwick McKibbin (Australian National University) said that the impact of this pandemic on the global economy could be three to four times greater than the SARS epidemic in 2003 with estimated losses amounted to 160 billion USD.

The Umih Association of French Tourism Professionals also shared the same view that it is still early to warn about this situation, however, if the epidemic is prolonged, the economic impact will be severe, first and foremost, for the hotel industry and luxury goods business. As for the luxury goods sector, the impact of losing Chinese customers is most obvious. According to UBS, Chinese customers buy up to a third of global luxury goods annually today, compared with just 10% during the 2003 SARS epidemic.

China's important position in the world economy today is the main reason leading to the disparity in the impact of these two epidemics. No one knows how long an epidemic coronavirus will last, how far it spreads, how many lives it will lose because of it. Therefore, it is not possible to fully calculate the impact of the epidemic on the Chinese economy at this time.

Prospects for economic recovery after COVID-19

Some lessons from SARS are still valuable for COVID-19, especially in identifying the cause to find solutions for recovery. Accordingly, the economic impact of COVID-19 does not directly stem from those infected. Instead, they stem from the containment policies that governments put in place to prevent epidemics, especially community quarantine and tourism bans, as well as preventive behavior by individuals. All of this will be amplified many times since COVID-19 is a much greater epidemic than SARS, meaning the overall economic loss is much greater.

Thus, with the serious and unforeseen impacts of COVID-19, the ability to recover the economy is very unstable. According to many researches, recovery depends crucially on expectations. In those cases where the shock significantly increased the fear of future shocks, recovery was slower. Households and businesses were more reluctant to buy and invest.

Without assurances that we have “solved” COVID-19 – with a vaccine or effective control – a full recovery is going to be impossible. The longer it takes, the more our recovery will be shaped like a drawn-out U rather than a V. As the Economist magazine recently put it, we will have a 90% economy. Without a good public health response we might even risk a W, where a second wave of infection requires further harsh but necessary social distancing. Without managing expectations about a COVID-free future, and without aggressive but well-targeted government action, the post-pandemic trajectory will look like an L. That will put a far greater burden on future generations than any debt governments might take on now to develop a vaccine or keep businesses afloat and people on payrolls.

So, reasonable government policy is the most important solution to economic recovery. And in that, supportive policies for startups can be considered as the optimal solution by startup founders who put everything on the line just to have a chance to build something that improves the world. It’s in their nature and it’s at the core of innovation. The scrappiness and creativity these leaders show will be tested during this downturn, and it is clear that those that survive and come out of this crisis with greater strength and resilience will lead the recovery into the new economy.

If governments can help increase the innovation coming from technology entrepreneurs and increase the incentives for venture capitalists to back entrepreneurs when they need it most, we can hack Darwin’s Law. Most startups fail because they should, but under COVID-19, companies are failing that shouldn’t. Without startups, the road to recovery will be so much longer. In order to rebuild the economy, let’s give them the tools to keep doing what they do best. And then, the international economy may be better after the COVID-19.

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