Here's How Disease Outbreaks Can Affect The Economy

By Lisa Melillo on January 30 2020 in Economics

Epidemics take a toll on a country's economy in several ways.
Epidemics take a toll on a country's economy in several ways.

With the 2020 coronavirus outbreak, many are questioning how this disease may affect the world economy. Disease outbreaks and epidemics cost governments millions of dollars each year. They halt travel, limit trade, and restrict daily activities by closing offices and schools. According to the World Bank, pandemics have a total economic cost of $570 billion annually – that’s 0.7% of the total world income.

How Disease Outbreaks Affect the Economy

Care for disease outbreak victims is expensive

When a disease outbreak strikes, emergency response units must immediately isolate victims to prevent further spread and treat those who are already sick. These processes come with a high price tag; the total government cost of quarantining and caring for Ebola victims from 2014 was in the hundreds of millions. This is despite the fact that only around 27,000 people were infected, 11,000 of whom died from the disease.

Disease outbreaks affect tourism

When an outbreak occurs in a specific geographic area, tourism is the first area to be affected. Travelers cancel their plans to visit the area and airlines may even halt flights to airports in the affected region. Governments often issue travel advisories encouraging their citizens to avoid any region with an active disease outbreak. For economies that depend on tourism this means a devastating loss of income for both individuals who work in the tourism industry and governments as a whole.

Disease outbreaks cause evacuations

Disease outbreaks cause panic, triggering inhabitants in affected regions to flee the area. This causes a cascade of effects on the economy. Inhabitants abandon homes and businesses, effectively halting daily economic activity. Evacuees flood neighboring regions, both straining their local economies and increasing the risk that the disease will spread to new regions. Foreign governments may also choose to evacuate citizens living abroad in an area with an active disease outbreak, as the United States government did during the 2020 coronavirus epidemic.

Disease outbreaks affect trade

During an epidemic, it’s not uncommon for governments to heavily restrict trade depending on the identified source of the illness. Goods from the affected area may be delayed for further inspection or halted entirely. For example, the mad cow disease outbreak in the 1990s led to a 10-year ban in the European Union on beef coming from the United Kingdom. Further decline in trade can come from lower demand due to decreased overall economic activity.

Preparedness for disease outbreaks

Even without the presence of a major global pandemic, governments and organizations must budget for research, development, and prevention of further disease outbreaks. The World Health Organization has established the Coalition for Epidemic Preparedness Innovations, or CEPI, which has received $740 million in funding. The organization’s mission is to develop vaccines against ongoing and future infectious diseases.

How Governments Respond To Disease Outbreaks

The economic effects of a disease outbreak can be devastating, but the human toll can be much worse. Some experts suggest that a major global pandemic is overdue and could potentially kill millions of people. The 20th century Spanish flu pandemic wiped out up to 5% of the world population; experts believe that another pandemic at the same scale would carry a total worldwide cost of $3 trillion.

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