14 March 2006
Pandemic Economic Effects Likely Severe but Brief, Report Predicts
International Monetary Fund report looks at possible economic disruptions
By Kathryn Mcconnell
Washington File Staff Writer
Washington -- The potential effect of an avian influenza pandemic on the global economy and financial systems could be severe but brief, the International Monetary Fund (IMF) says.
In a report released March 13, the IMF says disruptions as a result of an avian influenza (bird flu) pandemic could occur in transportation and tourism, trade and utilities, and that already financially vulnerable businesses may face bankruptcy.
Countries that already are financially stable and have strong plans to continue basic business operations would be less vulnerable, it says.
The IMF will issue more information on the expected effect of a pandemic in its April 11 Global Financial Stability Report and April 19 World Economic Outlook report, a fund representative said during a March 13 briefing.
At the briefing, IMF official Sandy MacKenzie said the most likely global economic effect of a pandemic would be high worker absenteeism as employees stay home to care for sick household members and avoid exposure to the disease in the workplace.
As ill workers recover from a flu outbreak, supplies of products and services would rebound, MacKenzie said.
The pace of recovery, however, would depend on business and consumer confidence, the IMF says.
Financial systems' information technology and communication infrastructure might be affected during a pandemic as absenteeism slows transactions, according to the IMF report.
The Federal Reserve Board and three other U.S. federal financial and thrift institution regulatory agencies March 15 advised financial institutions and their technology service providers to become more aware of the threat of a pandemic influenza outbreak and its potential effect on the delivery of critical financial services.
Major financial centers -- such as Tokyo, London and New York – especially need to consider how they would continue functioning without disruption to basic operations due to temporary high absenteeism, Charles Blitzer, another IMF official, said at the briefing.
A pandemic likely would affect fiscal balances as countries increase their spending on health care, public safety, social services and subsidies to businesses, IMF says.
Blitzer said all countries might want to consider how to meet increased requests from individuals and businesses for cash and low-risk assets.
The demand for cash could lead to temporary declines in asset prices that may stress financial institutions' balance sheets presenting "challenges in meeting regulatory norms," the IMF says.
Countries around the world -- especially those affected by severe acute respiratory syndrome (SARS) in 2005 -- already are thinking of how to adjust their plans to continue basic business operations, said IMF official David Hoelscher.
The IMF said that through its Emergency Natural Disaster Assistance Program it should be able to help its members address balance-of-payments needs on a "limited scale."
The IMF report and a transcript of the March 13 briefing are available on the fund Web site.
The Federal Reserve Board advisory is available on its Web site.
For more information on the avian influenza and efforts to combat it, see Bird Flu.
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
|
NEWSLETTER
|
| Join the GlobalSecurity.org mailing list |
|
|
|
