Sunday, December 18, 2005

News - Bird flu outbreak could cost economy up to $14 billion, say Finance officials

If an avian flu pandemic spreads to Canada, it could carve as much as $14 billion off the country's economy, say senior federal Finance Department officials.

In documents obtained by The Canadian Press under an Access to Information request, federal officials say such an outbreak could cut as much as 1.2 per cent off the country's annual gross domestic product, the broadest measure of the economy.

That may not sound like a great loss to Canada's economy in percentage terms.

But with GDP expected to grow at an average of 2.8 per cent in 2005, which the Bank of Canada says is pretty much its optimum speed, a 1.2 per cent loss of about $14 billion would slice the pace of healthy economic growth almost in half.

Certain sectors would be hit harder than others, should a deadly avian flu strain begin to spread from person to person in Canada, the analysis by Finance economists suggests.

Travel and tourism would be obvious early targets but the hospitality and entertainment sectors would also be hit hard as people would likely avoid going out socially and risking infection.

The analysis avoids calculating the human cost of a pandemic to focus on measuring the potential economic hit, said a federal Finance department spokesman.

"Human suffering and loss of life would obviously outweigh economic concerns," said David Gamble of Finance Canada.

"This may appear like more of a balance sheet approach, but that's what we were doing. . .the economics part."

The documents show officials did calculate that if an avian flu pandemic were to hit, as may as 6.2 million Canadians could fall ill and 133,000 would likely die.

South of the border, the administration of U.S. President George W. Bush has taken a darker view.

It has warned that a severe pandemic could infect up to a third of the U.S. population and kill anywhere from 209,000 to 1.9 million Americans, says the Bush administration's recent Pandemic Influenza Plan.

It put the health costs alone, not counting disruption to the economy, at $181 billion US for even a moderate pandemic.

Generally, however, economists are finding it tough to calculate the costs of a pandemic, since a bird flu outbreak is still hypothetical.

However, health experts around the globe are deeply concerned that a pandemic could happen and have been planning for the worst-case scenario.

So far, the virulent H5N1 strain of bird flu has killed at least 71 people in Asia since 2003. Most cases have been linked to contact with infected birds.

Experts have said repeated outbreaks in poultry are increasing the risk the virus could mutate into a form that can spread easily among people, possibly sparking a global pandemic.

Canadian Finance Department officials reviewed several other studies of likely pandemic outcomes, but their calculations are largely based on the experience of the 1918 global flu pandemic, said officials speaking on background.

The 1918 outbreak eventually infected half the world's population and killed 40 million people, the vast majority of them between the ages of 20 and 40.

They also considered the economic impacts of flu pandemics in 1957 and 1968, as well as the SARS outbreak in 2003, which killed 44 Canadians and walloped parts of the economy.

Some of their economic conclusions are consistent with findings from a study last fall by brokerage house BMO Nesbitt Burns.

Chief economist Sherry Cooper figured that for Canada, the costs of an avian flu pandemic could run from $8 billion to $18 billion.

However, her forecast caused a sensation with its worst-case scenarios of an economic crisis to rival the Great Depression, a conclusion Finance doesn't seem to share.

"With the U.S. - the engine of global growth - slowing trade and U.S. activity would slow economic activity worldwide," wrote Cooper.

And the Conference Board of Canada warned of a "sudden an dramatic (global) recession" while the World Bank estimated global GDP could be cut by two per cent in a pandemic.

Finance Department officials reached less dire conclusions, partly because they assume a fairly healthy rebound from a pandemic.

Economies "are quite resilient, people are fairly flexible and adaptable," said one official.

And markets can at least feel confident that Ottawa's books are in very healthy shape, which can help the economy weather almost any storm, Finance Minister Ralph Goodale said in an interview last month.

Ottawa may not be able to vaccinate the economy against a major upset, but Goodale says his government has built up immunity by paying down debt, keeping the books balanced and keeping investor and consumer confidence at healthy levels.

"We should never falter in our confidence. Canada is operating from a position of strength, we have had more than a decade of consistent economic strength," Goodale said.

Bird flu outbreak could cost economy up to $14 billion, say Finance officials


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