News / Africa

Ebola Claims Another Victim - Economic Growth

Liberia air-lifts supplies of chlorine,plastic tarpaulins, sprayers and other materials to Doctors Without Borders (UNICEF)
Liberia air-lifts supplies of chlorine,plastic tarpaulins, sprayers and other materials to Doctors Without Borders (UNICEF)
William Eagle

The Ebola crisis may have begun in Guinea, but Liberia is among the hardest hit – with more than 1,300 cases reported. 

Fear of the disease is spreading.

The planting season is being disrupted as workers flee from the farms, and trade and transportation has come to a halt where villages and border areas are quarantined. The UN Food and Agriculture Organization says as a result, food prices in Liberia are rising.

It says the cost of the staple cassava has increased by 150 percent and peppers by 133 percent. Prices are also going up for rice and even disinfectants like chlorine, that’s used to fight the disease.

The World Bank predicts reduced economic growth – including a drop in Guinea from 4.5 to 3.5 percent. Liberia’s finance minister says the country will not likely reach the expected yearly growth of 5.9 percent. In Sierra Leone, officials say the outbreak will is expected to reduce recent double-digit growth. 

Listen to report on the effects of Ebola on economic growth
Listen to report on the effects of Ebola on economic growthi
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Investor confidence

The extent of the economic downturn depends on the reaction of foreign investors, who are showing concern, especially for the smaller countries in West Africa that have been hit the hardest – Liberia, Sierra Leone and Guinea.

Ruby Sandhu-Rojon, the deputy director for the African Bureau of the United Nations Development Program,  said "the three countries were just coming out of conflict and [it was] their time to build up investments from the outside [especially in mining and timber]. What you’re seeing in some of the cases including Sierra Leone [is that] some of the companies have pulled out or decreased their work, and that will have an effect [on the economy and on unemployment]."

A high ranking official in charge of Sierra Leone’s mineral resources told Reuters that miners are afraid to go to diamond-mining districts where Ebola cases have been found. Among the investors that have stopped operations in Liberia is the Australian iron-ore company Tawana Resources.  It has suspended all non-essential activities and sent home many African and foreign workers. Another foreign company in Liberia, the Calgary-based Canadian Oversea Petroleum, has stopped drilling.

Health officials in New Delhi say if the crisis gets worse in the four West African countries, many of the 45,000 Indians who  live there, including business people, may return home.

Mead Over, a senior fellow at the Center for Global Development in Washington, said "What worries me is there seems to be an inability by the international economic community and international business to discriminate between Ghana and Burkina Faso, that have  never reported a case of Ebola, and Guinea, Liberia and Sierra Leone.  I’ve heard about cancellations of trips to and business with other countries, including Nigeria. Putting major industrial plans on hold because of the Ebola crisis is not logical, it’s a fear response that’s not justified."

Tourism

Regional officials say tourism is also at risk.

In Sierra Leone, a finance ministry official, Alimamy Bangura, told the French Press Agency that the outbreak is scaring away investors and is hitting the hotel industry.

In Nairobi, tour manager for Hallmark Travel Planners Levis Omandi said Ebola may affect tourism in Kenya as well.

He said several clients from North America and India have expressed concern about traveling to East Africa.  But he says those fears subsided in mid-August, when Kenya’s national airlines announced it would not fly to Liberia, Guinea and Sierra Leone.

"[Since] the 15th of August when Kenya Airways suspended their flights," he said, "fewer clients are showing concern. It seems as if that is no longer a concern for them and fewer are scared…. As long as the flights were continuing between Kenya and these countries, people were saying it was just a matter of time before someone with the virus travels here, infects other people and spreads [it]."

Measures to fight the virus are also affecting domestic trade.

Local markets have been disrupted by quarantining those who are ill or are thought to have been exposed to the virus. The markets have also been hurt by the crackdown on border crossings between three of the countries.

John Campbell, a Ralph Bunche senior fellow for Africa Political Studies at the Center for Foreign Relations, said in the short term, quarantining cuts back on economic activity.

"A population that is quarantined," he said, "cannot participate in buying and selling. A quarantined population cannot leave the area to go to work and cannot travel. It is an extremely serious step to take. But quarantining and tracing the contacts are the primary ways to stop the spread of Ebola. "

Local economy

Quarantining, hoarding and looting have contributed to an increase in food prices.

Mead Over of the Center for Global Development said food price inflation and unemployment will not hit everyone the same way.

For example, in rural areas, subsistence farmers grow their own foods for home consumption and are largely protected from the economic fallout.  Over says traders will suffer because quarantining keeps them from selling and buying products. The likely result:  shortages of salt, vegetables and other common foods.

Over says the urban poor are hit hardest -- and are the most vulnerable to the spread of Ebola.

"Unlike in rural areas where people are not in very close contact," he said, "in the poor slums of Monrovia can the capitals of Guinea and Sierra Leone, people live cheek by jowl. So if an individual is infected in a slum where people live, the infected person is quite likely to infect all those immediately living with them."

The World Bank says past diseases spread from animals to humans in India and East Asia have been costly: between $500 million to $50 billion in disease control and lost economic activity.  

Cost of containment

The World Health Organization estimates it could be $490 million.    

UNDP official Sandhu-Rojon says a study is underway to evaluate the full impact of the outbreak on the countries affected.  It will propose ways to rebuild their economies and health care systems.  And it will determine the financial and human resources needed by municipal officials to provide work. She says the UNDP report is expected to be out within three months.

The World Food Program is working to provide food and water for the quarantined. International agencies are responding to the health emergency with medical supplies and expertise. And the World Bank is providing $200 million in economic support.   

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