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.