Calculating the Grim Economic Costs of Ebola Outbreak 

The topic everyone on Wall Street is discussing urgently but quietly isn’t the volatile global stock market.

It is Ebola.

While thousands of health care workers seek to control the deadly virus in West Africa, and the Centers for Disease Control and Prevention and other medical professionals seek to prevent its outbreak in the United States, financial analysts and others have been trying to estimate — or “model,” in Wall Street parlance — the potential effect on the global economy.

The math is not pretty.

The most authoritative model, at the moment, suggests a potential economic drain of as much as $32.6 billion by the end of 2015 if “the epidemic spreads into neighboring countries” beyond Liberia, Guinea and Sierra Leone, according to a recent study by the World Bank.

That estimate is considered a worst-case scenario, but it does not account for any costs beyond the next 18 months, nor does it assume a global pandemic.

Christine Lagarde, the managing director of the I.M.F., was seen wearing a button that read: “Isolate Ebola, Not Countries.” She implored the audience: “We should be very careful not to terrify the planet in respect of the whole of Africa.”
That’s because the economic cost of fear, far more than medical costs, may be the most expensive outcome.

“Economic consequences also result when fear and concern change behavior,” David R. Kotok, the chairman and chief investment officer of Cumberland Advisors, wrote in a report late last week, addressing the potential fallout on gross domestic products. “If consumers and businesses retrench by reducing flights on airplanes, changing vacation plans or altering business connections in a globally interdependent world, G.D.P. growth rates will fall farther. We do not know how much, at what speed, or for how long.”

Of course, the greatest economic danger is in the economic isolation of countries. “By default or design, it really is an economic embargo,” Kaifala Marah, finance minister of Sierra Leone, said over the weekend about his country, which has been all but cut off from the outside world.

Wall Street has long built spreadsheets trying to estimate employment, economic growth figures and the values of businesses. But the economic variables of a true pandemic are almost incalculable. It becomes a series of guesstimates about the psychology of global citizens.

Right now, the economic challenges of the outbreak of Ebola are minimal. Let’s hope they remain that way.

 

Source: nyt- Calculating the Grim Economic Costs of Ebola Outbreak

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