Ebola’s economic impacts more from fear of disease than disease itself: World Bank
Findings from a World Bank analysis suggest that significant economic costs can be traced to, not the prevalence of the disease itself, widespread though its impact may be, but the fear factor resulting from peoples’ concerns about contagion. (Image: Business Insider)
Dreaded viral disease Ebola is not just eating into the health of the population of the affected West African nations, but is also steadily eroding their economic health.
More interestingly, findings suggest that significant economic costs can be traced to – not the prevalence of the disease itself, widespread though its impact may be – but the fear factor resulting from peoples’ concerns about contagion.
This are findings from a World Bank Group analysis of the Ebola epidemic, which was released just yesterday.
In the meantime, the World Bank Group (WBG) is mobilizing a $230 million financing package for the three countries – Guinea, Liberia, and Sierra Leone – hardest hit by the Ebola crisis, and as of mid-September 2014, of the pledged $230 million, the WBG has mobilized $117 million.
Meanwhile, the WBG analysis finds that if the virus continues to surge in the three worst-affected countries, its economic impact could grow eight-fold, potentially catastrophic for the economies, already in a vulnerable state.
However, the analysis also points out that economic costs can be limited if swift national and international responses succeed in containing the epidemic and mitigating “aversion behavior” – a fear response emerging from peoples’ concerns about contagion.
World Bank Group President Jim Yong Kim said, “The primary cost of this tragic outbreak is in human lives and suffering, which has already been terribly difficult to bear.”
But, he added that findings make it clear that the sooner there is an adequate containment response and decreased level of fear and uncertainty, the faster will Ebola’s economic impact be countered.
Overall, the short term impact over 2014 is estimated at a cumulative $359 million over the core three countries.
The analysis then uses two alternative scenarios to estimate the medium-term impact of the epidemic to the end of calendar year 2015.
A “Low Ebola” scenario envisions rapid containment within the three core countries, while “High Ebola” corresponds to the upper ranges of current epidemiological estimates.
For a “Low Ebola” scenario, the medium-term impact (2015) is estimated at $97 million.
On the other hand, for a “High Ebola” scenario, the medium-term impact (2015) goes shooting up to $809 million.
The analysis estimates the short-term impact on output to be 2.1 percentage points of GDP in Guinea (reducing growth from 4.5 percent to 2.4 percent); 3.4 percentage points in Liberia (reducing growth from 5.9 percent to 2.5 percent); and 3.3 percentage points in Sierra Leone (reducing growth from 11.3 percent to 8 percent).
More importantly for people on the ground, inflation and food prices were initially contained but are now rising in response to shortages, panic buying, and speculation. Families already vulnerable to food price shocks are becoming increasingly exposed.
Besides, exchange rate volatility has also increased in all three countries, particularly since June, fueled by uncertainty and some capital flight.
The analysis finds that the largest economic effects of the crisis are not as a result of the direct costs but rather those resulting from aversion behavior driven by fear of contagion.
This in turn leads to a fear of association with others and reduces labor force participation, closes places of employment, disrupts transportation, and motivates some government and private decision-makers to close sea ports and airports.
The findings of the analysis underline the need for a concerted international response. External financing is clearly needed in the three core countries, and the impact estimates suggest that containment and mitigation expenditures be as high as several billion dollars, as they would be cost-effective if they successfully avert the worse scenario.
Humanitarian support, fiscal support, screening facilities at airports and seaports, and finally, strengthening the surveillance, detection, and treatment capacity of African health systems are all an integral aspect of the rescue effort to mitigate and contain Ebola impact, both human and economic.