The markets have begun to pop champagne over the global economic recovery, but the elephant lurking in the room — swine flu — could trample those green shoots.
Spotted just four months ago, the new A(H1N1) influenza virus by June spread into a global pandemic and experts warn it could take a toll on productivity and financial systems, depending on the severity of outbreaks. About 1,800 people have died in the pandemic that now affects more than 170 countries, according to the WHO.
Though the number of cases reported has topped 182,000, the UN health watchdog cautions that the real number is higher because countries are no longer required to test and report individual cases.
Health officials are gearing up for a resurgence in cases as the northern hemisphere enters winter. So far, swine flu infections have been relatively mild, with typical flu symptoms that last about a week.
However, the pandemic virus could mutate into a more deadly form. Officials are projecting a shortfall in vaccines that are being rushed to market in hopes of warding off a global health disaster.
Faced with the unpredictability of flu viruses, economists say it is hard to assess the impact of swine flu on the delicate global economic recovery taking shape amid the worst world recession since World War II. So will the elephant leave the party quietly or run amok?
“As the severity of A(H1N1) is so far not severe, we would not expect the magnitude of the shock to the economy to be large relative to GDP,” IMF spokeswoman Simonetta Nardin said. “The main threat to financial stability is the risk that high levels of absenteeism could lead to breakdowns in the functioning of key financial systems.”
School closures would worsen absenteeism, further reducing workplace productivity.
Nardin said the effects of swine flu on global financial stability and the world economy would be covered in future updates of the IMF’s Global Financial Stability Report and World Economic Outlook (WEO), “as warranted by events.”
World Bank experts have estimated that the potential economic costs of a global influenza pandemic could range from 0.7 percent to 4.8 percent of global GDP, depending on the severity of the outbreak.
The lower estimate was benchmarked on the Hong Kong flu of 1968-1969, while the upper estimate was based on the devastating 1918-1919 Spanish flu, which infected an estimated one-third of the world’s population and caused 50 million deaths.
Based on the IMF estimate of 2009 global GDP of US$54.863 trillion, the swine flu pandemic, using the World Bank simulation, could cost the globe between US$384 billion and US$2.633 trillion.
“In the case of a serious flu, 70 percent of the overall economic cost would come from absenteeism and efforts to avoid infection,” World Bank experts wrote in the Global Development Finance report released in June. “Generally speaking, developing countries would be hardest hit, because higher population densities, relatively weak health care systems, and poverty accentuate the economic impacts in some countries.”
The swine flu virus was first identified in California in late April and officials linked the new virus to an outbreak of illnesses in Mexico.
Mexico has borne the brunt of the economic costs of the epidemic, particularly in the transportation and tourism sectors.