The Possible Ramifications of the Avian Flu on the Global Economy

According to U.S. Senate Majority Leader Bill Frist, a human outbreak of bird flu in the United States could deal a $675 billion blow to the economy, quoting a new study by the Congressional Budget Office. This study assumed a 2.5 percent mortality rate and that 30 percent of the population would be infected and that employees would miss three weeks of work. This estimated loss to our economy would result in a devastating 5 percent decrease in our gross domestic product. This scenario is considered worst case; however, experts estimate the chances of such a severe flu are less than one-third of 1 percent annually.

President Bush asked Congress to allocate $7.1 billion to fund his administrations bird flu preparedness plan, but so far no action has been taken. Even if that money were allotted for more medicine and better surveillance it would account for only about 1 percent of the hit that the economy would take if a pandemic were to occur.

The virus has now caused 77 deaths in six countries, but if the strain mutates into a form that can be transmitted easily between humans, experts believe it could quickly sweep around the world, impairing trade and devastating workforces.

The bird flu is likely to have an economic impact worldwide. Canadian financial analysts predicted that an avian flu pandemic would have dreadful consequences on the global economy. These experts are comparing the impact to the Great Depression of the 1930s.

Currently there are no vaccines available to control the spread of the avian influenza in humans, although some are being developed. Only nine countries have the capability to create vaccines on a commercial scale.

If a pandemic began, it would likely start in Asia and spread around the world. Deaths could possibly exceed more than 50 million. Billions of people would fall sick and billions more would be too afraid to go to work, according to health officials. Affected countries would probably force quarantines and close stock markets. Work absenteeism from deaths and illness would skyrocket, drastically affecting the economy

Attendance of sporting events, concerts, amusement parks and movies would plummet. Patronage of bars, restaurants and hotels would all but cease.

Also, a number of key industries, such as tourism, would be directly affected. Furthermore, the airline segment would also suffer if business and holiday travel decreased. Currencies in areas was the outbreak is greatest could be hit and quarantines might disrupt global trade. Widespread industrial closures could have a devastating effect on oil prices.

In addition, treasury markets would be vulnerable to a sell-off by Asian banks whose holdings are enormous. Also, the high death rate would create a surplus of housing, devastating the real estate market.

Based on these predictions experts expect that if an outbreak begins demand in many industries would drop by about 10%. Sales at arts, entertainment, and recreation and food services sectors would plunge by 80%. Transportation services, such as air, rail and transit, would fall by 67%. Demand for health care would rise by 15%,

One possible bright side is e-commerce might flourish since so many people would be forced to stay home.

Economically, Hong Kong, Singapore and China are the countries predicted to be most vulnerable because they rely on trade and tourism and have large, dense populations. Major cities like Tokyo, which rely on mass transport systems, could also see commerce affected.

The affect on the economy is not solely dependant on an outbreak. Fears of infection, whether justified or not, may have a big impact on sectors such as retail spending and tourism as people opt to stay at home.

The Possible Ramifications of the Avian Flu on the Global Economy

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