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Economic Implications of Pandemic Could be Staggering

A bird flu pandemic would cause major loss of life and could push the world into a recession. New studies by two major financial institutions say an outbreak would particularly hurt Southeast Asia.

The Asian Development Bank projects more than three million deaths and losses of up to nearly $300 billion if a bird flu pandemic breaks out in Asia. World Bank economist Milan Bramhbhatt predicts even bigger losses, of up to $800 billion.

"Initially there would be a significant shock, simply from people trying to avoid becoming infected and from various control measures, which would lead to people avoiding tourism, transportation, hotels, restaurants etc., as well as significant disruption in the workplace."

Mr. Bramhbhatt bases his projections on the effects of a 2003 outbreak of severe acute respiratory syndrome or SARS, which killed nearly 800 people and caused millions in losses.

Earlier forecasts had already predicted a minor slowdown in economic growth across the region due to rising oil prices and lower consumer demand, but Homi Kharas, chief economist at the World Bank, says a full blown pandemic would change everything.

"Avian flu is really the big risk that overshadows what will happen in the region. There's been substantial outbreaks in the poultry populations across a number of East Asian countries,” said Mr. Kharas. “And although there have been relatively few human casualties so far, there is considerable concern that this particular strain of flu might mutate into one that will cause substantially higher human casualties and then substantially higher economic costs as well."

The H5N1 strain of bird flu has killed 62 of 120 people who became infected after coming into contact with diseased birds, but experts say mortality rates would increase exponentially if the bird flu mutates.

More than 120 million birds have been destroyed. China says it is banning poultry imports from 14 countries and some areas have reported declining levels of tourism.

But Doug Chester, Australia's ambassador to APEC, the Asia Pacific economic Cooperation organization, warned countries not to over-react.

"Whilst it is a serious threat, there is an element of scare-mongering that is undermining effective planning in some economies and it is causing unnecessary economic damage to some economies," he said.

The U.S., which announced a $7.1 billion strategy to prepare for a possible flu pandemic, predicts direct losses of up to $170 billion from medical expenses and lost productivity. Airlines are also bracing for industry declines if the government imposes travel restrictions.