Ebola’s threat to the economy

published 17 October 2014

The topic everyone on Wall Street is "discussing urgently but quietly" isn't the stockmarket slide, says Andrew Ross Sorkin in The International New York Times. "It's Ebola."

The rapid spread of the disease in west Africa has fuelled fears of a potentially massive blow to the world economy if it takes hold elsewhere and a global pandemic results. Cases have already emerged in America and Spain. More than 4,000 of the 8,300 people recorded as infected so far have died and cases are doubling every 20 days.

When it comes to pandemics, "changes to behaviour hurt productivity more than the actual disease", says Una Galani on Breakingviews. Investment falls away as businesses avoid affected areas; consumers change their holiday plans; production plummets as people stay away from work.

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The Sars outbreak in Asia a decade ago killed 750 people and caused six months of turbulence. China, Taiwan and Singapore all saw "restaurants and hotels empty out" as tourism dried up. Regional retail sales dipped by 6% year-on-year. Hong Kong fell into recession.

It's practically impossible to predict how a pandemic and the economic fallout it causes will develop, says Sorkin.But that doesn't stop economists trying. The immediate impact of Ebola is inwest Africa, where Liberia, Sierra Leone andGuinea are the epicentre of the outbreak. The World Bank's most pessimistic scenario sees the region losing $33bn.

Still, that's 0.2% of US GDP, says Breakingviews' Edward Hadas. To do much more damage, Ebola would have to take hold in the developed world.

This should be improbable. Sars was airborne, while people have to come into contact with a victim's blood to catch Ebola. Countries with reasonable medical infrastructure have so far been able to contain it; Nigeria and Senegal managed to stop it spreading, for instance. Nonetheless, the overall global response has been slow.

Anthony Banbury, head of the UN Ebola emergency response mission, says "the virus is far ahead of us". And globalisation has intensified the links between the developed world and poorer states prone to disease, says Galani.

So, while it does not appear to be the most likely outcome, "it is possible to envisage a situation where the disease gets out of control", says Charles Stanley's Tony Shepherd. Yet another thing for markets to worry about.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.