Home / Specials / Ebola /  The economic impact of the Ebola outbreak

New Delhi: On Thursday, Craig Spencer, a doctor who recently returned from Guinea, became New York City’s first reported Ebola case after he was diagnosed with the virus.

Spencer is the fourth American to be so diagnosed. On the same day, Mali, considered to be an important trade transit hub in sub-Saharan Africa, reported its first case. With the World Health Organization (WHO) confirming the worst in its latest update, with over 10,000 reported cases, the economic impact of the virus outbreak is slowly taking centre-stage, especially in the African continent.

According to a World Bank report released earlier this month, there are two distinct channels through which the outbreak could affect the economies in the affected countries. First, “the direct and indirect effects of the sickness and mortality themselves, which consume health care resources and subtract people either temporarily or permanently from the labor force". Effectively, it means lower labour supply in these countries, largely thanks to workers being diagnosed with the virus and subsequently dying from the virus, or those taking care of patients or those staying at home due to fear of exposure to Ebola, thus resulting in reduced productivity, lower output and lesser household income.

The second channel, the report says, is largely through the indirect or behavioural effects of the

How does it impact the economies? For a start, it lowers the prices domestic producers receive for their products, and increases the prices of import domestically, thus reducing income.

The major brunt of the Ebola outbreak is felt by sectors which are also integral to the economies of the affected countries. These include agriculture, services, construction, mining, tourism and transportation. Agriculture has been hit particularly hard, with production of key export commodities like cocoa, coffee and palm oil (in Guinea’s case) declining anywhere between a third and 75%, as per the report. For Liberia, production and export of rubber, which is the country’s single biggest export commodity, has been disrupted by “the reduced mobility of the workforce and by difficulty in getting the product to the ports due to implementation of quarantine zones".

Construction in all three countries—Guinea, Liberia and Sierra Leone—has been severely affected, again due to widespread fear among the workforce. The World Bank also estimates that if the outbreak is not met with a swifter response, “the two-year regional financial impact could reach $32.6 billion by the end of 2015".

It is not just in the affected economies that the impact is being felt. The ripple effect of the Ebola outbreak is slowing down neighbouring economies, with several disruptions. While Nigeria has been officially declared by WHO as an Ebola-free country, the report says that “commercial businesses in Lagos indicate significant recent declines in demand, sometimes in the range of 20 to 40 percent". 

Gambia, whose economy is largely dependent on tourism, is witnessing a major downturn in this sector. According to a Bloomberg report, in Gambia, “hotel bookings are down by 65 percent due to a fear of the virus". This is being attributed to a “geographic misfortune" of “being located within a few hundred kilometers of Senegal’s border with Guinea". In non-affected countries in Africa, the stigma of the outbreak is having an impact on potential international investors and multinationals operating in these countries. The geographical impact of the Ebola outbreak is also affecting East African countries like Kenya, especially key sectors like tourism and transportation.

However, since the recent Ebola outbreak began in December 2013, the global airline industry is perhaps the worst affected. The outbreak has led to several countries imposing various rules and regulations on air travel, including strict measures like increased passenger screenings.

According to a report by the Official Airline Guide (OAG), before the outbreak in 2013, 264,300 passengers travelled by air from the affected countries to either Europe or North America. However, as of October 2014, year-on-year capacity and frequency are down by 64% from the affected countries.

“In May 2014, there were some 427 flights from Liberia, Sierra Leone and Guinea to any destination in the world. In October, that had fallen to some 152 flights scheduled, providing some 22,782 seats," John Grant, executive vice-president of OAG, was quoted as saying in the report.

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