Avian flu pandemic may halt Asia's growth rate to zero

An avian flu pandemic could halt Asia's growth rate to virtually zero and reduce the global trade of goods and services by 14-percent. This was stated in an Asian Development Bank (ADB)'s research report 'The potential economic impact of an avian flu pandemic on Asia', disclosed sources here on Wednesday.
The report stresses that there were many unknowns in predicting the consequences of a new flu pandemic. This analysis has shown the consequences of a realistic and relatively mild set of assumptions and could be significantly worse if the outbreak lasts longer or is more virulent, it added.
The report underscores that there were three major unknowns in projecting the 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 the supply side effects, resulting from shrinkage in the work force.
The study examines two possible scenarios. The first was a mild outbreak with an infection rate of 20 percent and a population mortality rate of 0.1 percent (equivalent to 3 million people dead in Asia), with the most serious economic effects lasting two quarters. The second models the same health outcome but with the serious economic effects lasting four quarters and a psychological impact stretching beyond Asia.
According to the report, the outcomes of a potential pandemic would basically depend on public policy responses. Governments and international organisations could do much to moderate the downside risk through appropriate and timely public policies, especially co-ordinating activities and sharing information. It should act transparently and disseminate accurate and timely information. Recent experiences with Sars and other disease outbreaks have shown that the public and markets often panic in the face of uncertainty.
The report said that in the case of the first scenario, Asia could face a demand shock of around US $99 billion in its 2006 GDP, the equivalent of 2.3 percentage points lost.
"Some Asian economies could be harder hit than others, depending on their vulnerability to external shocks and whether they depend on a significant quantity of services, including tourism," it added.
"In the second scenario, the Asian consumers and investors would reduce their activity and the rest of the world would cut back on consumption. The estimated loss to the region could be US $283 billion, or around 6.5 percentage points of GDP, resulting in cutback in Asia's GDP growth to 0.1 percent. Global GDP could also shrink to -0.6 percent," the report observed.
According to the report, the psychological impact of the disease might be long lasting; much of the Asian boom was built on confidence in the region's growth potential, a pandemic could shake that confidence and lower future investment.