Thailand's billion-dollar tourism industry should survive the outbreak of Avian Flu or Bird Flu largely unscathed, provided the virus doesn't mutate to a form of human-to-human transmission.

Economists and industry officials say that despite an anticipated temporary slowdown in travel to Thailand mainly due to psychological reasons, the perceived risk from Bird Flu is considerably smaller than that from the SARS epidemic last year, and any impact this time around will likely be limited.

Still, analysts say that Thailand's government may be underestimating the overall damage on the Thai economy from the Bird-Flu outbreak, and the fallout on food exports from Thailand may drag for several months at the risk of engulfing other sectors of the Thai industry as well.

The main issue is whether the Bird Flu outbreak will last longer than a few weeks, in which case tourists might start being worried, said Sriyan Pietersz, economist at JP Morgan Securities in Bangkok, Thailand.

Sriyan estimates the overall impact on Thailand's gross domestic product growth from the Avian Flu at one percentage point, assuming that poultry exports from Thailand, which have borne the major brunt from the fallout, don't resume for about 6 months and that other areas of the Thai economy, including tourism, will only suffer from a limited impact.

That estimate is well above the Thai government's expectations that the Bird Flu outbreak will trim only 0.1 percentage point from GDP growth, and most other economists' estimates the Bird Flu impact on the Thai economy of 0.2 and 0.5 percentage point.

There is a danger that people underestimate the fallout of the disease as poultry exports from Thailand may not resume any time soon judging from the European Union's reaction, Pietersz noted.

The Thai government targets GDP growth of over 8% this year, compared with JP Morgan's forecast of 6.3%. The brokerage house won't revise its forecast as it expects the government of Thailand to compensate for the Avian Flu losses through stimulus spending.

The European Union on Monday criticized Thailand for "Non-Transparency" in dealing with the Bird Flu outbreak and said it would demand independent verification that Avian Flu had been eradicated in Thailand before it would lift the ban on chicken imports from Thailand, as imposed last week.

After several days of denial, Thailand finally acknowledged last Friday that it was dealing with a bird-flu outbreak that has so far affected as many as 13 Thai provinces out of the Kingdom's 76 provinces and has claimed the lives of at least 2 children. Another 10 Thai people are suspected to have been infected by the Avian Flu virus, of whom 5 have died.

Critics say that the government of Thailand covered up early knowledge of the Bird-Flu outbreak to protect the country's lucrative poultry export industry. Thailand is the fourth-largest poultry exporter in the world, with Japan and the European Union being its biggest export markets for chickens.

Bird Flu Easier To Deal With Than SARS

Thailand's stock market was the region's worst-performing after Bangkok announced its the first human death from Bird Flu on Monday, with Thai airline and poultry stocks the hardest hit.

Prospects that the bird-flu outbreak may take its toll on other Thai sectors as well, in particular the tourism-and-travel industry in Thailand, sparked panic-selling across the board on the Stock Exchange of Thailand Monday afternoon, leading to the index's single largest daily drop since June 2002.

The Thai SET Index tumbled 28.88 points, or 3.8%, to 725.56 at Monday's close, but Tuesday afternoon the SET index had already regained some of the previous day's losses, rising 1.5% to 736.48 points.

Thai Airways International tumbled 4 baht (US$ 160), or 7.3% on Monday on worries its earnings might be affected, but has climbed back 2% in the afternoon trade Tuesday.

During the outbreak of severe acute respiratory syndrome (SARS) in the region last year, Thai Airways lost total revenue of about 10 billion Baht (US$ 0,25 billion) as its cabin factor fell to as low as 52% at the height of the SARS outbreak in the second quarter of last year from over 70% before that period.

Tourist arrivals in Thailand fell by as much as 30% during the SARS crisis, bringing the overall impact of SARS on Thailand's GDP to about 0.6 percentage point. Tourism accounts for about 6% of Thailand's GDP.

At this point, it's too early to say what impact the Bird-Flu outbreak will have on tourism in Thailand but I don't see any parallels between the Avian Flu virus and SARS, said Marcel Schneider, general manager of Diethelm Travel, a leading inbound tour operator in the region based in Bangkok. The bird flu is quite a known quantity and it's much easier to deal with than SARS, as long as it's does not start to transmit from human to human.

Schneider said that since it wasn't known that the disease had spread to Thailand until last Friday, there were no cancellations yet and no slowdown in forward bookings, but there had been inquiries from worried overseas partners on the situation.

Meantime, Pietersz said that although travelers may be somewhat wary of going to certain rural areas in Thailand, top-end destinations such Phuket, Pattaya and Koh Samui shouldn't be much affected at all.

But economists say it's a whole different story if the Bird Flu virus would start mutating, as the World Health Organization has warned it could eventually do, then spreading of the dangerous virus among humans would start.

Scientists believe that currently people only get the disease through contact with sick birds. Although there has been no evidence yet of human-to-human transmission in the Avian Flu outbreak in Thailand, health officials are concerned the bird flu might mutate further and link with regular forms of human influenza into a virus-form that could trigger the next human flu pandemic in the world.

9 Asian governments, including Indonesia and Vietnam, have so far reported Bird-Flu outbreaks. But the virus has infected humans only in Thailand and Vietnam, killing a total of 8 people so far, of which 6 of them in Vietnam.

If it turns out that the Avian Flu virus starts mutating across large sections of the Asian population, then we could see an overall slowing down of economic growth in the region as business and consumer confidence would dip and domestic demand start to slow down, the DBS Bank said in a research note. But the experience from dealing with SARS means that containment of the disease this time around will be much faster, the DBS-report says, adding that, after all, the SARS epidemic was contained within three months.