Fear of Sars is having a serious effect on Asia's tourism industry

The Asian Development Bank (ADB) has reduced its forecast for economic growth in the region in 2003 from 5.6% to 5.3%.

The impact of the pneumonia-like virus, Sars, and global economic difficulties are behind the reduction, but the ADB also said the economies of the Asia Pacific region will remain what it calls 'the world's economic bright spot'.

The ADB said the developing Asian region was still expected to outperform the rest of the world including the United States, Japan and the Eurozone.

It said this was due to strong domestic demand in the region, improving export performances, and supportive and prudent fiscal and monetary policies.

Control is crucial

The ADB forecast follows a warning from the World Bank last week that the Sars virus and the aftermath of the war in Iraq are likely to knock almost one-sixth off economic growth in Asia this year.

Sars is already significantly affecting travel and tourism but the ADB said its effect on economic growth in the 41 regional economies (excluding Japan) will largely depend on how long the outbreak lasts.

"If the epidemic is not brought under control by about mid-May, the economic impact on developing Asia will be much broader and deeper," the ABD said.

If it is brought under control quickly and its effect on tourism minimised, the Bank predicts economic growth across the region to reach 5.9% in 2004.