Economic Impact of Epidemics

•  Infectious disease occurrences are slowly but relentlessly rising. With this, their impact on the global economic order is also increasing.
• As the whole world travel, trade, and communicate through a growing hyperlinked ecosystem, an increasing number of businesses will come to the realization that they will be impacted by diseases that originated from far-off territories.
•  One threat that they will be facing is the outbreak itself. The other is the fear induced by the disease.
• An outbreak typically takes around 36 hours to move from a remote village to any major urban area in the world.
• The corresponding economic or social disruption is expected to advance further and more rapidly.
• The reality of a world that has "always-on news and fake news" will result in fear propagating more rapidly than any disease. Scares like this usually result in explosive policy reactions, massive change in consumer behavior, and wide apprehension among employees.
• In the previous outbreak incidents caused by SARS, MERS, and Ebola, businesses were badly hit as people steered away from public establishments such as restaurants, stores, and movie houses.
• Employees found it hard to commute to work as they are scared to take public transport. They also need to take care of their kids while the schools were closed.
•  Supply chains and basic services were interrupted as blockages and disruptions increase.
• Companies found it hard to cope to ensure the continuity of their operations and to provide support to their customers.
• These firms were ill-prepared as these extraordinary occurrences were not normally found in their disaster recovery playbook.
•  Recent studies on pandemics revealed that the potential economic impact of these infectious diseases is catastrophic and has the same magnitude as the yearly impact of climate change.
• According to economists, the estimated yearly economic losses caused by outbreaks will be around 0.7% of the global GDP in the coming decades.
• Based also on the flu outbreak data of the 20th century, the Commission on a Global Health Risk Framework for the Future assessed that the annualized impact is around $60 billion.
• Other estimates that include the mortality aspect placed the annualized amount to around $570 billion. This figure is close to the $890 billion annual climate change monetary impact.
• Including other diseases such as Ebola and Zika in the figure will definitely result in a higher estimate.

Coronavirus (COVID-19) Impact

• As the COVID-19 outbreak is still ongoing, the work to assess the impact is still in progress.
• Based on initial assessments, the COVID-19 outbreak is on track to result in massive supply chain disruptions that are not witnessed in the last 70 years.
• Some analysts are comparing the disease to the 1918 Spanish flu pandemic that resulted in the death of millions globally.
• From a supply chain point of view, the disruptions that will be caused by COVID-19 are much more massive and cannot be compared to past outbreaks such as SARS. The outbreak is also impacting both the supply side and the demand side.
• This is particularly a valid assumption since China has evolved to be a major player in the global manufacturing industry since the SARS epidemic. From the demand side, the country also became a key consumer market.
• The current supply chain order is also more global and more sophisticated than what was existing back in 2003.
• As more Chinese manufacturers stop their operations due to cease orders and quarantine policies, manufacturing locations in other geographies are already running low on their inventories of goods that were coming from China.

Ebola Impact

• The CDC referenced a World Bank estimate of around $2.2 billion in GDP losses due to Ebola in three African countries for just one year (2015).
• The amount included the direct impact on population health and care services. There are also indirect components such as the effect on food supply and job security.
• If these were taken into account, the total cost for the three countries will reach $53 billion.
• These costs did not even include the cost of the efforts to revive the economy, whether successful or not.
• In addition to these cost considerations, the costs of prevention and mitigation in neighboring countries, the modifications in travel behaviors, and other economic impacts also drove the cost up.
• While a portion of these figures was shouldered by the countries, most of the Ebola pandemic impact was felt by private firms, their personnel, and their vendors in West Africa and other territories.

SARS Impact

• The 2003 impact of the SARS epidemic on the economy is not as massive as what was initially predicted. The speedy containment of the disease prevented further losses.
• After a brief period of economic disruption that took several months, the economy rebounded.
• However, while the epidemic is still in progress, there were significant drops in air travel and tourism.
• The SARS pandemic of 2002-2004 caused a 6.2% drop in tourist arrivals in Hong Kong.
•  Leisure and hotel services were also impacted as people avoid public areas.
• Overall, the rough economic impact of SARS was around 0.5%–1% of the yearly GDP of all the affected countries in the Asia-Pacific Economic Cooperation zone. The disease caused disruptions and losses in the areas of "tourism, leisure, and transport."
• The following are the estimated losses in these areas: $8.5 billion in the People's Republic of China (PRC); $1.4 billion in Malaysia; and $1.3 billion in Hong Kong and China.

Summary of Findings:

• Our one hour of research provided some of the impacts of the COVID-19 outbreak on the supply chain.
• We also provided some of the economic impacts of past pandemics such as Ebola, the flu outbreaks, and SARS.