Global bird flu outbreak slows growth, says ADB

Global bird flu outbreak slows growth, says ADB

Urip Hudiono, The Jakarta Post, Jakarta

A global bird flu pandemic could have a severe impact on
regional consumption and productivity, crippling the economies of
Indonesia and the East Asian region, a new study from the Asian
Development Bank (ADB) reveals.

In a worst-case scenario, Indonesia's gross domestic product
(GDP) growth next year could be cut back by as much as US$5.8
billion -- or 2.8 percentage points -- as consumers and investors
worldwide reduce their activities due to the outbreak.

East Asia could lose up to a total of $297 billion of its GDP,
slashing its expected growth rate by 6.8 percentage points.

The ADB is estimating a 5.9 percent GDP growth for Indonesia
in 2006 and a 6.6 percent growth for the whole region.

The scenario assumes the bird flu outbreak of having an
infection rate of 20 percent and a mortality rate of 0.5 percent
-- which is equivalent to three million fatalities in Asia --
with serious economic effects lasting four quarters and a
psychological impact stretching beyond the continent.

Even in a milder version of the scenario, in which the
economic effects would last only two quarters and be felt in Asia
alone, Indonesia could still suffer a GDP reduction of $1.4
billion, or 0.7 percentage points, while regionally GDP cutback
would be $113 billion, or 2.6 percentage points.

"On the demand side, a pandemic is likely to affect consumer
confidence and change consumption and social patterns. On the
supply side, it will affect the availability of labor as illness
will force many workers to stay home, and affect the livestock
sector negatively," the ADB said in its report, released on Nov.
3.

The research was conducted by ADB economist Erik Bloom, senior
health specialist Vincent de Wit and economics officer Jane
Carangal-San Jose.

"The psychological impact of the disease may be long lasting
as well. Much of the Asian boom is built on confidence in the
region's growth potential. A pandemic could shake that confidence
and lower future investment," the report said.

According to the report, 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.

Singapore, China, Hong Kong, Malaysia and Thailand are
significant goods and services exporters in the region.
Indonesia's services and tourism sectors, meanwhile, contribute
to some 5 percent of the GDP, but its economy is known to be
prone to external shocks.

Any economic impacts from a bird flu outbreak would be another
blow to the economy, which is already expecting a slowdown to 5.7
percent this year, amid a recent rise in inflation and interest
rates. Economic growth of 6.2 percent has been targeted for next
year.

In light of the situation, the ADB urged governments to be
transparent, as well as to disseminate accurate and timely
information about bird flu cases in their countries.

"Recent experiences with SARS and other disease outbreaks have
shown that the public and markets often panic in the face of
uncertainty," it said.

The ADB estimated that the economic impact of SARS, which
killed 800 people worldwide in 2003, was around $18 billion in
East Asia alone. The bird flu, meanwhile, has infected 122 people
and killed more than 60 in the region since 2003.