Avian flu pandemic may halt Asian growth, says ADB report

Kathmandu, November 4:

Asian Development Bank (ADB) has hinted that an avian flu pandemic could halt Asia’s growth to virtually zero and reduce the global trade of goods and services by 14 per cent.

The report, ‘The Potential Economic Impact of an Avian Flu Pandemic on Asia’, stresses that there are many unknowns in predicting the consequences of a new flu pandemic. “Analysis has shown consequences of a realistic and relatively mild set of assumptions,” it says. “The consequences could be significantly worse if the outbreak lasts longer or is more virulent.”

The report underscores that there are three major unknowns in projecting possible economic impact of a pandemic, the magnitude and duration of the pandemic, the psychological impact resulting in loss of consumer and investor confidence, and supply side effects, resulting from shrinkage in the work force.

“One clear lesson from the SARS outbreak in 2003 was the psychological impact on economic activity,” says the report. Compared to the SARS outbreak however, ‘a flu pandemic could be substantially more damaging in both human and economic terms.’

The study examines two scenarios. The first is a mild outbreak with an infection rate of 20 per cent and a population mortality rate of 0.1 per cent (equivalent to three million people dead in Asia), with the most serious economic effects lasting two quarters. The second model shows the same health outcome but with more serious economic effects lasting four quarters and a psychological impact stretching beyond Asia.

The outcomes of a potential pandemic will basically depend on public policy responses. Governments and international organisations can do much to moderate the downside risk through appropriate and timely public policies, especially coordin ating activities and sharing information.

“Governments and international agencies should act transparently and disseminate accurate and timely information,” the report says. “Recent experiences with SARS and other disease outbreaks have shown that the public and markets often panic in the face of uncertainty.”

In the case of the first scenario, Asia could face a demand shock of around $99 billion in its 2006 GDP, the equivalent of 2.3 percentage points lost.