# 3501
Oxford Economics, a think tank out of England, has released another economic assessment of the impact of the H1N1 pandemic. Last month in Pandemic Economic Concerns, I posted on their concerns that a pandemic could have significant negative impacts on the global economy.
Under reasonable assumptions about infection and death
rates (30% and 0.4% respectively), the duration of the
pandemic (six months from October 2009) and responses
by households and businesses to the pandemic, we
estimate that world GDP would be cut by around US$2.5
trillion in the six months of the pandemic, or 3.5% of 2009
GDP.
Today they’ve released a new report, and their forecasts are for even greater impacts than stated in the previous report.
Could swine flu tip the world into deflation?
Health experts agree that, while the current flu epidemic that started in Mexico in April 2009 may weaken during the summer, it could re-appear in the autumn, possibly in a stronger form. Using historical benchmarks of previous flu pandemics and of the SARS episode, we estimate the economic impact of a global flu pandemic in the UK. The GDP loss during the six months of the pandemic would amount to around 5% in the UK. That a pandemic is likely to hit the global economy just as it starts to recover from recession could result in the economic impact being larger than would otherwise have been the case, and this could tip the world and UK economies into deflation. UK CPI inflation would fall to around -1% throughout 2010-12 and UK GDP growth next year could be as low as -7½%. 17 July 2009
learn more
Risk that flu outbreak could tip 'stretched UK into deflation
By Laura May, Press Association
Friday, 17 July 2009
Swine flu could tip the UK into deflation and see gross domestic product (GDP) plummet by 5 per cent as panicked consumers stay at home to avoid infection, a report said today.
As workers fall ill and take time off work businesses will struggle to maintain productivity, and those who escape infection will find it difficult to get to the office as staff shortages hit the transport network, the report by economic forecaster Oxford Economics said.
The firm has based its forecast on the effect of the Sars outbreak in 2003 on the Asian economy, which hit leisure spending and caused a collapse in travel to affected countries.
But it warned that the current recession will mean that the UK economy will not bounce back as the Asian markets did and it could take up to four years to recover.
The report states: "This time around, such a sharp rebound is unlikely. GDP would likely remain below baseline for some time. However, by 2011 GDP growth could be above our baseline forecast and the economic loss would be gradually recouped within around 3-4 years.
"But there is a risk that swine flu tips the UK and the world economy into deflation. This is because the pandemic would hit at a time when businesses and banks are still reeling from the economic crisis.
Over the years we’ve seen a variety of economic forecasts on the likely impact of a pandemic issued by private groups, and all warn that a pandemic has the potential to deliver a serious economic blow to the global economy.
For governments, still reeling from a year-long recession and praying that trillions of dollars worth of stimulus spending will pull the world out of the doldrums, the timing of this pandemic could hardly be worse.
While I don’t put a lot of faith in any individual forecast, I do accept that a pandemic – even a mild pandemic – will have a serious impact on economies around the world.
