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The president of the World Bank has warned that a pandemic could kill tens of millions people and wipe out between 5 to 10 per cent of GDP of the global economy. Jim Yong Kim said in Frankfurt on Tuesday the world was “complete unprepared” for an outbreak on the scale of the Spanish Flu outbreak witnessed in 1918, which killed between 3 to 5 per cent of the world’s population at that time.
Quoting research commissioned by Bill Gates, founder of Microsoft, Dr Kim said a Spanish flu-like pandemic in the modern era would kill 33m people in 250 days. The recent Ebola outbreak had, the former physician, who has headed the World Bank since 2012, said, “revealed the shortcomings of international and national systems to prevent, detect, and respond to infectious disease outbreaks.”
It was also, according to Dr Kim, by far the biggest risk to the global economy.
According to the World Bank’s own estimates, a tenth of global GDP amounts to as much as €7.56trn – a sum worth about four-fifths of China’s economy. A pandemic would also, according to the World Bank chief, hit the world’s poor the hardest.
The lower figure of 5 per cent, or $3.78trn, is based on a report published by the World Bank Group in the wake of the avian flu outbreak. Dr Kim’s 10 per cent estimate is at the upper bound of forecasts cited by insurer, Lloyd’s of London, published in 2008.
From the Lloyds report:
A repeat of the 1918 pandemic is expected by many to lead to a major global recession, estimates of the impact range from 1 per cent to 10 per cent reduction in global GDP. The impact will vary depending on country and within countries.
Most industries will be affected, typically adversely. Those industries requiring a significant amount of face to face interaction are expected to be the most affected. These include: travel companies, airlines, restaurants/bars, hotels and the entertainment industry. The impact on local communities will somewhat depend on the mix of business activity….
…The current financial crisis in 2008 gives us a stark reminder of the interconnected nature of the global economy and the financial services industry in particular…
…A key issue is that past pandemics occurred at a time when global trade was significantly different than now. We do not know how the shockwave of a pandemic will impact supply chains.
More recent figures, published by the World Bank in April this year, have highlighted the degree to which the Ebola outbreak has ravaged the economies of the West African countries it has worst affected.
The estimated losses to Sierra Leone, Guinea and Liberia a year after the epidemic struck were $2.2bn so far (the countries’ combined GDP in 2013 was $12.2bn). And while by April 2015, the epidemic had been largely contained, the economic repercussions are expected to continue for some time yet as uncertainty about complete eradication persists.
In Sierra Leone, the economy most affected, the mining sector has ground to an almost complete halt. The World Bank forecasts the country’s economy will shrink by an unprecedented 23.5 per cent. Ballooning healthcare costs are expected to result in fiscal deficits of 12.8 per cent in Liberia, 10.1 per cent in Guinea and 4.6 per cent in Sierra Leone this year.
So what to do to limit the devastating consequences of pandemics? For Dr Kim, the solution was clear: act fast.
Doing so had to involve financial muscle, specifically from insurance companies such as Lloyds that could draw on their expertise, as well as medical know how.
The World Bank said at a Group of 20 meeting late last year that, while it had managed to commit about $1bn to Ebola up to that point, it had to scramble for the resources because of the lack of a dedicated pandemic fund. The bank is now working with partners on a new financing facility that would provide much-needed rapid response financing in the face of an outbreak, Dr Kim said on Tuesday. “The idea behind a pandemic emergency facility is to mobilise and leverage public and private sector resources through public funding, and through market and private insurance mechanisms.” That facility has come too late for victims of Ebola, but a more rapid financial response could contain the spread – and cost – of future outbreaks.