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Flu pandemic: Can JA cope with the economic impact?
Published: Sunday | June 28, 2009
By D. Ramjee Singh and Allan Wright, Contributors
A roadside vendor (right) wears a mask for protection from the Influenza A H1N1 virus as he sells phone cards in front of the new Captain's Bakery in Manchester. The customer, also seeking to protect himself from infection, turns his face away as he is being given a card. - Photo by Richard Bryan
Major flu pandemics have occurred three times over the last century beginning with the Spanish Flu in 1918, followed by the Asian Flu in 1957 and the Hong Kong Flu in 1968. There have been several other pandemics but of smaller proportions such as SARS, avian flu and HIV/AIDS which is currently presenting a tremendous challenge to many countries across the world.
It is generally accepted that major pandemics have a 10-40 year lifecycle. With the last one occurring in 1968 many are of the belief that the next pandemic is inevitable. Although it is difficult to predict the actual timing and severity of the next pandemic what is even more difficult is to forecast the economic impact it would have across economies.
The World Bank (2008) has indicated that a severe flu pandemic could push the world economy into a recession resulting in a contraction of global gross domestic product by approximately US$3 trillion while the death toll is expected to reach 71 million. The report further indicated that some 60 per cent of this decline would come about because of behaviour modification by individuals trying to avoid infection. The anticipated behavioural change is expected to have an adverse influence on economic activities in areas such as tourism, transportation, retail and distributive trade and would, also, lead to lower productivity and higher absenteeism at the work place.
serious consequences
A 2006 study published by the Lowy Institute suggests that even a mild pandemic has serious consequences for global economic activities as global output is predicted to contract by US$330 billion and could kill 1.4 million persons. In any pandemic analysis two types of impact are usually examined; one relates to the medical impact, while the other speaks to the economic effect, the size of which will depend largely on the degree to which the economy is susceptible to the shock of the pandemic.
The rest of this article presents a summary of the results from a study that explored the potential macro-economic implications of a severe influenza pandemic on the various sectors of the Jamaican economy. It was one of several presentations delivered at a CARICOM pandemic influenza work shop organised by The University of the West Indies (UWI), Mona, earlier this year in Kingston.
Background to the Study
The paper examined a Jamaican economy that was dis-aggregated into 10 sectors; four were classified as goods producers while the remaining six were identified as service providers. Each sector was assigned an attack rate, that is, the proportion of the employed work force that is expected to be infected by the influenza virus. The choice of an attack rate was influenced largely by the perceived level of human-to-human contact within each sector. Past experience has shown that although influenza is not the deadliest of viruses it has a higher attack rate than other lethal viruses because it spreads quite easily when there is close human-to-human interaction.
Against this background, workers in sectors such as wholesale and retail, hotels and restaurants, manufacturing, financing, insurance, real estate and business services; and transport, storage and communication would likely have a higher than average level of exposure, and hence, a greater risk of contracting the virus compared to those in agriculture, mining and construction and installation.
The study argued that an infected worker will require 10 working days to recuperate. An influenza pandemic normally strikes in several waves. The 1918 pandemic occurred in three waves while the 1857 and 1968 pandemics had two waves, each. Typically, according to a KPMG study, the most intense of these waves last for approximately two weeks usually occurring during the fourth and 11th week from the start of the pandemic. Further when estimating the economic effect in many cases some times it is useful to separate the demand from the supply impact of the pandemic.
The focus of the study was on the supply effect only, that is, loss in man hours and GDP, under the assumption that although the population will take precautionary measures to avoid infection, giving rise to the demand effect, non-infected persons will not stay away from work in significant numbers because the economic costs from such action will be quite onerous to households. Obviously, if people were to stay away from work in significant numbers in order to avoid infection, then, the loss in man hours and the contraction in output will be much higher than is estimated by the study.
In addition, given the recent re-introduction of free heath care, the study presumed that medical cost will be covered through government transfers to public health facilities, such as clinics and hospitals, to meet the demand that will be placed on these institutions.
projected contraction
Projected estimates of sectoral contraction in the country's output/ GDP were put at:
? Wholesale and retail, hotels and restaurants: J$825.2 M
? Transport, storage and communication: $484.8 M
? Financing, insurance, real estate and business services: $418.6 M
? Manufacturing: $358.3 M
? Electricity, gas and water: $46 M
? Agriculture, forestry and fishing: $60.5 M
? Mining: $ 94 M
It is patently clear that the output shock will be felt predominantly within the service sectors where output/GDP is expected to contract in excess of $1.7 billion. A decomposition of the output outcomes shows that the usual sectors will carry the brunt of the shock. The economic impact must be understood within the context that principal impact of a pandemic is morbidity and not mortality. So, the magnitude of the impact depends on the severity of the pandemic and the attendant level of morbidity.
NB: Cited references are available in the original paper, entitled: 'Influenza Pandemic and its Macro Economic Implications for the Jamaican Economy' which is available from the Department of Management Studies, UWI, Mona.
D. Ramjee Singh is a seniorlecturer in the Management Studies Department at the UWI, Mona. Allan Wright is alecturer in the Department of Management Studies, UWI, Mona. Feedback may be sent to columns@gleanerjm.com
Published: Sunday | June 28, 2009
By D. Ramjee Singh and Allan Wright, Contributors
A roadside vendor (right) wears a mask for protection from the Influenza A H1N1 virus as he sells phone cards in front of the new Captain's Bakery in Manchester. The customer, also seeking to protect himself from infection, turns his face away as he is being given a card. - Photo by Richard Bryan
Major flu pandemics have occurred three times over the last century beginning with the Spanish Flu in 1918, followed by the Asian Flu in 1957 and the Hong Kong Flu in 1968. There have been several other pandemics but of smaller proportions such as SARS, avian flu and HIV/AIDS which is currently presenting a tremendous challenge to many countries across the world.
It is generally accepted that major pandemics have a 10-40 year lifecycle. With the last one occurring in 1968 many are of the belief that the next pandemic is inevitable. Although it is difficult to predict the actual timing and severity of the next pandemic what is even more difficult is to forecast the economic impact it would have across economies.
The World Bank (2008) has indicated that a severe flu pandemic could push the world economy into a recession resulting in a contraction of global gross domestic product by approximately US$3 trillion while the death toll is expected to reach 71 million. The report further indicated that some 60 per cent of this decline would come about because of behaviour modification by individuals trying to avoid infection. The anticipated behavioural change is expected to have an adverse influence on economic activities in areas such as tourism, transportation, retail and distributive trade and would, also, lead to lower productivity and higher absenteeism at the work place.
serious consequences
A 2006 study published by the Lowy Institute suggests that even a mild pandemic has serious consequences for global economic activities as global output is predicted to contract by US$330 billion and could kill 1.4 million persons. In any pandemic analysis two types of impact are usually examined; one relates to the medical impact, while the other speaks to the economic effect, the size of which will depend largely on the degree to which the economy is susceptible to the shock of the pandemic.
The rest of this article presents a summary of the results from a study that explored the potential macro-economic implications of a severe influenza pandemic on the various sectors of the Jamaican economy. It was one of several presentations delivered at a CARICOM pandemic influenza work shop organised by The University of the West Indies (UWI), Mona, earlier this year in Kingston.
Background to the Study
The paper examined a Jamaican economy that was dis-aggregated into 10 sectors; four were classified as goods producers while the remaining six were identified as service providers. Each sector was assigned an attack rate, that is, the proportion of the employed work force that is expected to be infected by the influenza virus. The choice of an attack rate was influenced largely by the perceived level of human-to-human contact within each sector. Past experience has shown that although influenza is not the deadliest of viruses it has a higher attack rate than other lethal viruses because it spreads quite easily when there is close human-to-human interaction.
Against this background, workers in sectors such as wholesale and retail, hotels and restaurants, manufacturing, financing, insurance, real estate and business services; and transport, storage and communication would likely have a higher than average level of exposure, and hence, a greater risk of contracting the virus compared to those in agriculture, mining and construction and installation.
The study argued that an infected worker will require 10 working days to recuperate. An influenza pandemic normally strikes in several waves. The 1918 pandemic occurred in three waves while the 1857 and 1968 pandemics had two waves, each. Typically, according to a KPMG study, the most intense of these waves last for approximately two weeks usually occurring during the fourth and 11th week from the start of the pandemic. Further when estimating the economic effect in many cases some times it is useful to separate the demand from the supply impact of the pandemic.
The focus of the study was on the supply effect only, that is, loss in man hours and GDP, under the assumption that although the population will take precautionary measures to avoid infection, giving rise to the demand effect, non-infected persons will not stay away from work in significant numbers because the economic costs from such action will be quite onerous to households. Obviously, if people were to stay away from work in significant numbers in order to avoid infection, then, the loss in man hours and the contraction in output will be much higher than is estimated by the study.
In addition, given the recent re-introduction of free heath care, the study presumed that medical cost will be covered through government transfers to public health facilities, such as clinics and hospitals, to meet the demand that will be placed on these institutions.
projected contraction
Projected estimates of sectoral contraction in the country's output/ GDP were put at:
? Wholesale and retail, hotels and restaurants: J$825.2 M
? Transport, storage and communication: $484.8 M
? Financing, insurance, real estate and business services: $418.6 M
? Manufacturing: $358.3 M
? Electricity, gas and water: $46 M
? Agriculture, forestry and fishing: $60.5 M
? Mining: $ 94 M
It is patently clear that the output shock will be felt predominantly within the service sectors where output/GDP is expected to contract in excess of $1.7 billion. A decomposition of the output outcomes shows that the usual sectors will carry the brunt of the shock. The economic impact must be understood within the context that principal impact of a pandemic is morbidity and not mortality. So, the magnitude of the impact depends on the severity of the pandemic and the attendant level of morbidity.
NB: Cited references are available in the original paper, entitled: 'Influenza Pandemic and its Macro Economic Implications for the Jamaican Economy' which is available from the Department of Management Studies, UWI, Mona.
D. Ramjee Singh is a seniorlecturer in the Management Studies Department at the UWI, Mona. Allan Wright is alecturer in the Department of Management Studies, UWI, Mona. Feedback may be sent to columns@gleanerjm.com