Ebola wreaks economic havoc as it tears through Africa
At a time when sub-Saharan Africa is one of few regions that continue to experience robust economic growth, the Ebola outbreak is taking a toll on the African economy and threatens to have far-reaching consequences for the continent’s GDP, reaching into tens of billions of dollars.
According to an economic impact assessment for the World Bank Group, released ahead of a press briefing on Thursday, the regional financial impact could be as high as $32.6-billion by the end of 2015 should the deadly virus spread to neighbouring countries, some of which have large economies.
Already, the economic impacts of Ebola are very serious in the core three countries – particularly Liberia and Sierra Leone – where government capacity is already overrun and the outbreak is impacting economic activity and budgetary resources, said the World Bank Group’s analysis, noting it could become catastrophic if containment is slow.
“Beyond the terrible toll in human lives and suffering, the Ebola epidemic currently afflicting West Africa is already having a measurable economic impact in terms of forgone output; higher fiscal deficits; rising prices; lower real household incomes and greater poverty,” the report said.
Huge short-term impact
The World Bank found short-term impact on output in 2014 is on the order of 2.1 percentage points of GDP in Guinea (reducing growth from 4.5% to 2.4%); 3.4 percentage points of GDP in Liberia (reducing growth from 5.9% to 2.5%) and 3.3 percentage points of GDP in Sierra Leone (reducing growth from 11.3% to 8.0%). This forgone output for these three countries corresponds to $359-million in 2013 prices.
The short-term fiscal impacts are also large, the bank said, at $113-million (5.1% of GDP) for Liberia; $95-million (2.1% of GDP for Sierra Leone) and $120-million (1.8% of GDP) for Guinea.
“These economic impacts include the costs of healthcare and forgone productivity of those directly affected but, more importantly, they arise from the aversion behaviour of others in response to the disease,” the report said.
“Slow containment scenarios would almost certainly lead to even greater impacts and corresponding financing gaps in both 2014 and 2015. Governments are mitigating some of these impacts on their budgets through reallocation of resources, but much international support is still needed.”
The death toll of the haemorrhagic fever at last count has reached 3 879 – although the true figure is feared to be as much as four times larger due to under-reporting – and is mostly concentrated in Liberia, Guinea and Sierra Leone.
A man who had contracted the disease in Liberia died in Dallas, Texas on Wednesday and a healthcare worker in Spain this week was the first person in this outbreak to contract the disease outside the African continent.
Slow containment will cost billions
At a briefing on its latest World Economic Outlook released on Tuesday, the International Monetary Fund outlined positive growth projections for Africa, which proved much higher than projections for most other regions. The speakers however also warned of the threat Ebola posed to African economies.
“This overall positive outlook is, however, overshadowed by the dire situation in Guinea, Liberia, and Sierra Leone, where the current Ebola outbreak is exacting a heavy human and economic toll,” the report said.
The fund said it expected Africa to grow at the same rate of 5.1% this year as it did last year, but warned that should the Ebola outbreak linger, or spread, the economic consequences could be severe.
In its report the World Bank said “it is far from certain” that the epidemic would be fully contained by December and mapped out two possible scenarios, looking at the medium-term impact into 2015. A “low Ebola” scenario expects rapid containment within the most severely affected nations, while a “high Ebola” corresponds to slower containment in the three countries, with broader regional contagion.
The medium-term impact on output in Guinea is estimated to be negligible under low Ebola, but could cost 2.3 percentage points of GDP under high Ebola. In Liberia, it is estimated to be 4.2 percentage points of GDP under low Ebola, or 11.7 percentage points of GDP under High Ebola.
In Sierra Leone, the impact would be 1.2 percentage points of GDP under Low Ebola, and 8.9 percentage points under High Ebola.
“The estimates of the GDP lost as a result of the epidemic in the core three countries (for calendar year 2015 alone) sum to $97-million under Low Ebola, and $809-million under High Ebola,” the report said. “Under Low Ebola, the loss in GDP for the sub-region is estimated to be $2.2-billion in 2014 and $1.6-billion in 2015. Under High Ebola, the estimates are $7.4-billion in 2014, and $25.2-billion in 2015.
Help required from international community
The bank noted the estimates are subject to considerable uncertainty, “arising not only from the usual and well-known problems associated with economic forecasting and data scarcity, but also from the unusually high degree of uncertainty associated with the future epidemiological path of Ebola, and with people’s behavioural responses to it”.
In a release World Bank president Jim Yong Kim implored the international community to help to limit the economic impact, which would not only impact on the immediately affected countries but also their trading partners and the world.
“With Ebola’s potential to inflict massive economic costs on Guinea, Liberia, and Sierra Leone and the rest of their neighbours in West Africa, the international community must find ways to get past logistical roadblocks and bring in more doctors and trained medical staff, more hospital beds, and more health and development support to help stop Ebola in its tracks,” said Kim.
“The international community now must act on the knowledge that weak public health infrastructure, institutions, and systems in many fragile countries are a threat not only to their own citizens but also to their trading partners and the world at large.”
The World Bank also announced it would mobilise $400-million in emergency financing for the three countries hardest-hit by the crisis.
According to the Associated Press, the leaders of three Ebola-stricken West African nations are meeting with heads of the United Nations, the International Monetary Fund and the World Bank to discuss the outbreak and what help they need to fight it.