The recent outbreak of the Ebola virus in West Africa has developed into an overwhelming humanitarian and global health crisis. However, as with any destabilizing element, the outbreak also has far-reaching consequences for economic growth. Shaun Willoughby examines the epidemic in light of economic effects.
These days, even the mere whisper of the word ‘ebola’ sends anyone within a five mile radius into a state of panic. The outbreak of the Ebola virus has had dire humanitarian consequences. The need for the people of Africa and the world to find a containable solution is paramount. However, I would like to delve into the economic effects of the Ebola epidemic. I would like to look at these economic problems in 3 layers, locally, nationally and internationally. All of these effects are interconnected. I believe that looking at the consequences of this virus in stages is the best way to visualise the current and future problems associated with Ebola.
I would like to begin with the economic problems facing countries like Liberia, Guinea and Sierra Leone. As the virus started to spread people began to retreat into their homes, and daily life ground to a halt. As a result, this trickled down to affect the amount of trade in commerce markets in Liberia and Guinea. Even the agriculture and services sectors in these three hard-hit countries were suffering due to a dwindling workforce. The very essence of fear is enough to create economic havoc. Fear can be seen as a pandemic in itself. Once investors and sectors of industry begin to become fearful, economic growth and production starts to stagnate. GDP growth in Guinea is expected to fall from 4.5% to 3.5%. Meanwhile, the Liberian economy was expected to grow by 5.9%. This will unfortunately not happen this year. The systematic chain of the Liberian economy will begin to crumble as foreign workers in the transport and services sectors will not work within a country that hosts a potentially lethal virus.
In recent years, Africa as a continent has started to rise up from the doldrums of economic growth and seen real progress. According to the IMF, the GDP of Sub-Saharan is expected to jump 5.1% in 2014-faster than any other region in the developing world, excepting emerging Asia. This is a monumental statistic! A continent regarded as an economic weight to developed countries has begun to take-off. However, the Ebola virus has curtailed much of the growth. The two year financial cost for Africa resulting from the virus could reach up to $32.6 billion. The number of flights to the most affected countries have dropped by 64% since May 2014. Not only do travel restrictions affect the tourism industry, but also prevent industrial cargo and staff members for multinational corporations from entering, leading to operational losses. Conversely there is limited access to supplies for factories and repair technicians for equipment. As a result, production has slowed. In my view, the implications of the Ebola virus represents a catch 22 situation. Since staff and supplies are not reaching Sierra Leone or Liberia for example, other countries’ trade will be affected, creating inflation and dropping economic demand. Hence, national governments will not be able to provide any top-down support and consequently the cycle would repeat. It would be a great shame if the African recovery of recent years regressed due to this terrible outbreak.
The spread of fear and panic in the international markets can be where the real damage exists, at least in the long term. World Bank data shows a 20-40% decline in commercial demand around the world since the spread of the virus. Where does the panic end? What will happen when a developed nation either in Western Europe or North America is significantly affected? Once countries start to close borders and restrict movement and trade to affected countries, the whole network that globalisation is built upon will begin to crumble. Consequently, internal trade internally will stagnate and we could potentially see a global economic crisis, such as the 2008 recession or the Great Depression of the 1930’s. Like all economic theory, my projections are hypothetical and therefore may never escalate to this degree. Yet, it is very easy to see how the Ebola virus can spread economically as well as on a humanitarian scale.
The views expressed in this article are those of the author and do not necessarily represent the views of Development in Action.
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