The potential for the swine flu to turn into a major pandemic is causing a lot of people across the world to panic. While most people are more concerned with their health at this point, we should not overlook the cost of this pandemic to world coffers. One study estimates the potential expense of dealing with a major outbreak at $3 trillion. For more on this, read the following article from Money Morning.
The delicate state of the global economy could be rocked by an outbreak of swine flu, which has killed over 100 people in Mexico and infected many others in the United States, Canada, Spain and New Zealand.
Underscoring the serious nature of an outbreak is a study conducted by the World Bank in 2008, which estimated a major swine flu pandemic could cost $3 trillion and cause worldwide gross domestic product (GDP) to plummet almost 5%.
"The threat of the pandemic will add further weakness to global trade – we saw with SARS tangible percentage points knocked off the index and that was in a buoyant time. Put that in a weaker time and it is likely to be more unpleasant," he said.
The SARS outbreak cost the Asia Pacific region an estimated $40 billion when it disrupted travel and trade for six months in 2003. It killed 775 people in 25 countries.
The Mexican outbreak of swine flu comes just as world policymakers began to see signs that the global economy might finally be stabilizing after being hammered by a withering recession for more than a year.
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"Six or eight weeks ago, there were no positive statistics to be found anywhere. The economy felt like it was falling vertically,” Lawrence Summers, economic adviser to President Barack Obama told reporters on Sunday. "Today, the picture is much more mixed. I think that sense of unremitting freefall that we had a month or two ago is not present today."
Swine flu is a respiratory disease of pigs caused by type-A influenza that regularly leads to outbreaks in swineherds, according to the U.S. Center of Disease Control (CDC). The three main human flu strains cause 250,000 to 500,000 deaths a year in seasonal epidemics, according to the World Health Organization (WHO).
Pandemics occur when a unique strain of influenza emerges and begins spreading, mainly because almost no one is naturally immune to the virus, according to Bloomberg News.
Heading the list of sectors that may feel the impact is the travel and tourism industry. Travelers may cancel trips and many businesses have plans to limit travel if a pandemic starts.
As worries about a global pandemic surged, the U.S. government Monday began border screening for swine flu exposure.
The Air Transport Association, an airline trade group, said there had been no decision to restrict travel between the United States and Mexico. Restricting flights would be useless once the disease started spreading, WHO said in a statement. About 5.9 million U.S. citizens flew to Mexico in 2008, according to the U.S. Commerce Department.
However, Andorra Vassiliou, the European Union’s health commissioner urged Europeans to postpone nonessential travel to the United States or Mexico, telling reporters people "should avoid traveling to Mexico or the United States of America unless it is very urgent for them."
Despite the fact there is no evidence the flu can be spread by contact with pigs, pork producers in the United States and Mexico could see a drop in sales.
China’s General Administration of Quality Supervision, Inspection and Quarantine banned all direct or indirect imports of swine or pork products from Mexico and from Texas, California and Kansas, the states where cases of the flu have been confirmed.
Russia and Indonesia have also banned imports of pork and edible swine products. Prices for hogs fell on Friday to a two-month low in the United States.
But the threat of a pandemic may trigger a windfall for some makers of drugs and vaccines.
Gilead Sciences Inc. (GILD) and Roche Holding Ltd. (ADR: RHHBY) license and make Tamiflu, and GlaxoSmithKline PLC (ADR: GSK) and Biota Holdings Ltd license and make Relenza, which are both recommended drugs for seasonal flu and have been shown to work against the new disease. Tamiflu is expected to be in greatest demand in a pandemic because it is a pill. Relenza is inhaled.
Leading flu vaccine manufacturers, including Sanofi Pasteur, the vaccines division of Sanofi-Aventis SA (ADR: SNY), Glaxo, Novartis AG (ADR: NVS) and Baxter International Inc. (BAX), said they were standing by to begin developing a vaccine, but it could take months to actually reach the market.
This article has been reposted from Money Morning. You can view the article on Money Morning’s investment news website here.