A report by the Asian Development Bank (ADB) showed that the estimated reduction in annual gross domestic product (GDP) growth as a result of avian flu in the Philippines is only one percentage point in 2006.
The reduction in consumption, trade in services and investments is higher in other Asean economies such as Malaysia with 7.1 percentage points, Singa-pore with 10.4 percentage points and Thailand with 6.3 percentage points.
The ADB report said that an avian flu pandemic spread by human to human transmission could halt Asia’s growth rate to virtually zero and reduce the global trade of goods and services by 14 percent.
An avian flu outbreak lasting two quarters would see Asia face a loss of GDP in 2006 of around $99 billion — the equivalent of 2.3 percentage point loss of GDP.
ADB said that if the outbreak lasted four quarters with an infection rate of 20 percent and a population mortality rate of 0.1 percent equivalent to 3 million dead — the estimated loss to Asia would be $283 billion or around 6.5 percent GDP shrinkage with Asia’s shrinking to only 0.1 percent and global GDP would shrink to -0.6 percent.
The report noted that Asian consumers and investors would reduce their activity and the rest of the world would cut back on consumption.
The report — on The Potential Economic Impact of an Avian Flu Pandemic on Asia - stresses that there are many unknowns in predicting the consequences of a new flu pandemic.
"This analysis has shown the consequences of a realistic and relatively mild set of assumptions," it says. "The consequences could be significantly worse if the outbreak lasts longer or is more virulent."
The report underscores that there are three major unknowns in projecting the possible economic impact of a pandemic — the magnitude and duration of the pandemic; the psychological impact resulting in loss of consumer and investor confidence; and the supply side effects, resulting from shrinkage in the work force.
"One clear lesson from the SARS outbreak in 2003 was the psychological impact on economic activity," the report says. Compared to the SARS outbreak however, "a flu pandemic could be substantially more damaging in both human and economic terms."
The study examines two possible scenarios. The first is a mild outbreak with an infection rate of 20 percent and a population mortality rate of 0.1 percent equivalent to 3 million people dead in Asia, with the most serious economic effects lasting two quarters.
The second models the same health outcome but with the serious economic effects lasting four quarters and a psychological impact stretching beyond Asia. The outcomes of a potential pandemic will basically depend on public policy responses, the report says.
Governments and international organizations can do much to moderate the downside risk through appropriate and timely public policies, especially coordinating activities and sharing information, it argues.
"Governments and international agencies should act transparently and disseminate accurate and timely information," the report says.
"Recent experiences with SARS and other disease outbreaks have shown that the public and markets often panic in the face of uncertainty."
In the case of the first scenario, Asia could face a demand shock of around $99 billion in its 2006 GDP, the equivalent of 2.3 percentage points lost.
Some Asian economies could be harder hit than others, depending on their vulnerability to external shocks and whether they depend on a significant quantity of services, including tourism.
