REUTERS NEWS
POLL-Foot-and-mouth seen slicing 0.3 pct off UK growth
LONDON, March 30 (Reuters) - Ripple effects from Britain's farming crisis, particularly on tourism, could reduce economic growth by more than a quarter percentage point this year, economists in a Reuters survey said.
Foot-and-mouth disease, which has restricted access to large parts of the countryside, will reduce gross domestic product growth by 0.3 percentage points in 2001, the median of 17 forecasts in the survey carried out this week showed.
In another Reuters survey taken in January, before the farm epidemic broke out, economists predicted growth of 2.5 percent this year. In his budget on March 7 Chancellor of the Exchequer Gordon Brown forecast growth of 2.25-2.75 percent in 2001. GDP grew 2.6 percent year-on-year in the fourth quarter of 2000.
About half a million farm animals have been slaughtered since mid-February in an attempt to control the disease's spread. But it shows few signs of abating and although agriculture, trucking and other industries will be hit, tourism is likely to bear the brunt.
``Most of the effect on the economic growth will come through tourism as opposed to agriculture per se,'' said David Page economist at Investec. But respondents to the survey cautioned the final outcome would depend on the duration of the disease.
TWO BILLION POUND TOURISM LOSS
Adam Chester, chief economist at the Halifax Bank said agriculture and trucking would be hurt by the crisis.
``But the bigger impact could be on tourism. Foreign tourism currently accounts for about 13 billion pounds ($18.5 billion) a year in Britain,'' he said. ``This could fall by two to three billion pounds. Bear in mind, the figures have not taken into account the confidence effect on the economy as a whole.''
On March 21, the British Tourist Authority (BTA) said the outbreak was already having a severe impact on tourism, with losses expected to reach the region of two billion pounds, and possibly more, depending on how long the crisis lasts.
On the assumption the number of newly-reported cases begins to ease in the next few weeks, JP Morgan Chase put the potential impact at 0.3 percent of GDP or three billion pounds. This estimate also assumes the tourist industry will be affected.
``If the crisis continues into the summer the impact on ... the economy will escalate. Even so estimates that GDP could be lowered by 1.0 percent still look far too pessimistic and would require the outbreak to persist for the rest of the year at least,'' said Danny Gabay at JP Morgan Chase in a research note.
CULLED ANIMALS CLASSED AS ``BREEDING''
From the 1967 experience, the last time a foot-and-mouth epidemic afflicted Britain, the impact on supply could be lagged by one year and therefore will not really show up in the agricultural sector until 2002, analysts said.
``The reason is that just as then, the majority of animals being culled are classed as 'breeding' rather than for meat consumption,'' Gabay said.
Agricultural output in 1968 and 1969 slumped as stocks were replenished, Gabay said. ``Hence we may not see the full impact of this crisis on GDP until next year, though the hit to prices will be more immediate.''
Five forecasts for the cash hit to GDP in the Reuters survey gave a median of four billion pounds and a range of two to 10 billion pounds. Percentage estimates of the impact on GDP ranged between 0.1 percent and 1.0 percent.
PUBLIC FINANCES COULD ALSO SUFFER
If estimates at the top end of the range prove to be near the mark Britain's public finances could suffer, partly as a result of the reduced tax take from the slowdown in the economy.
``The other reason, of course, is that Brown's budget didn't take into account compensation payments for foot-and-mouth. If these payments are extended to the tourist industry the impact could be quite substantial,'' said Chester.
Those who expect foot-and-mouth to have a small effect, at zero to around 0.1 percent this year, say the tendency in the middle of the crisis is to exaggerate the impact.
``I suspect it will not be as great as some current estimates suggest ... and that was certainly true of initial estimates of the BSE crisis,'' said Richard Jeffrey, director of economics at ING Charterhouse Securities.
In the mid-1990s confirmation of a link between CJD, a fatal human disease and BSE, known as ``mad-cow'' disease, led to export bans on British beef and a widespread cull of cattle.
Copyright © 2001 Reuters Limited. All rights reserved. Republication or redistribution of Reuters Limited content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters Limited. Reuters Limited shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
POLL-Foot-and-mouth seen slicing 0.3 pct off UK growth
LONDON, March 30 (Reuters) - Ripple effects from Britain's farming crisis, particularly on tourism, could reduce economic growth by more than a quarter percentage point this year, economists in a Reuters survey said.
Foot-and-mouth disease, which has restricted access to large parts of the countryside, will reduce gross domestic product growth by 0.3 percentage points in 2001, the median of 17 forecasts in the survey carried out this week showed.
In another Reuters survey taken in January, before the farm epidemic broke out, economists predicted growth of 2.5 percent this year. In his budget on March 7 Chancellor of the Exchequer Gordon Brown forecast growth of 2.25-2.75 percent in 2001. GDP grew 2.6 percent year-on-year in the fourth quarter of 2000.
About half a million farm animals have been slaughtered since mid-February in an attempt to control the disease's spread. But it shows few signs of abating and although agriculture, trucking and other industries will be hit, tourism is likely to bear the brunt.
``Most of the effect on the economic growth will come through tourism as opposed to agriculture per se,'' said David Page economist at Investec. But respondents to the survey cautioned the final outcome would depend on the duration of the disease.
TWO BILLION POUND TOURISM LOSS
Adam Chester, chief economist at the Halifax Bank said agriculture and trucking would be hurt by the crisis.
``But the bigger impact could be on tourism. Foreign tourism currently accounts for about 13 billion pounds ($18.5 billion) a year in Britain,'' he said. ``This could fall by two to three billion pounds. Bear in mind, the figures have not taken into account the confidence effect on the economy as a whole.''
On March 21, the British Tourist Authority (BTA) said the outbreak was already having a severe impact on tourism, with losses expected to reach the region of two billion pounds, and possibly more, depending on how long the crisis lasts.
On the assumption the number of newly-reported cases begins to ease in the next few weeks, JP Morgan Chase put the potential impact at 0.3 percent of GDP or three billion pounds. This estimate also assumes the tourist industry will be affected.
``If the crisis continues into the summer the impact on ... the economy will escalate. Even so estimates that GDP could be lowered by 1.0 percent still look far too pessimistic and would require the outbreak to persist for the rest of the year at least,'' said Danny Gabay at JP Morgan Chase in a research note.
CULLED ANIMALS CLASSED AS ``BREEDING''
From the 1967 experience, the last time a foot-and-mouth epidemic afflicted Britain, the impact on supply could be lagged by one year and therefore will not really show up in the agricultural sector until 2002, analysts said.
``The reason is that just as then, the majority of animals being culled are classed as 'breeding' rather than for meat consumption,'' Gabay said.
Agricultural output in 1968 and 1969 slumped as stocks were replenished, Gabay said. ``Hence we may not see the full impact of this crisis on GDP until next year, though the hit to prices will be more immediate.''
Five forecasts for the cash hit to GDP in the Reuters survey gave a median of four billion pounds and a range of two to 10 billion pounds. Percentage estimates of the impact on GDP ranged between 0.1 percent and 1.0 percent.
PUBLIC FINANCES COULD ALSO SUFFER
If estimates at the top end of the range prove to be near the mark Britain's public finances could suffer, partly as a result of the reduced tax take from the slowdown in the economy.
``The other reason, of course, is that Brown's budget didn't take into account compensation payments for foot-and-mouth. If these payments are extended to the tourist industry the impact could be quite substantial,'' said Chester.
Those who expect foot-and-mouth to have a small effect, at zero to around 0.1 percent this year, say the tendency in the middle of the crisis is to exaggerate the impact.
``I suspect it will not be as great as some current estimates suggest ... and that was certainly true of initial estimates of the BSE crisis,'' said Richard Jeffrey, director of economics at ING Charterhouse Securities.
In the mid-1990s confirmation of a link between CJD, a fatal human disease and BSE, known as ``mad-cow'' disease, led to export bans on British beef and a widespread cull of cattle.
Copyright © 2001 Reuters Limited. All rights reserved. Republication or redistribution of Reuters Limited content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters Limited. Reuters Limited shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
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