An Expensive Ebola Virus

By Eduardo Gomez

Most media coverage of the Ebola outbreak has focused on fears of a medical pandemic and debating the most effective ways to stop the disease from spreading. Less attention has been paid to the economic effects of Ebola, particularly its potential to cripple the socio-economic development that West Africa had finally seemed to be attaining. 

The rapid spread of this contagious disease has brought about a death toll nearing 5,000 victims, most of which come from three developing countries in West Africa: Liberia, Guinea, and Sierra Leone. Developing countries tend to have great difficulty in mitigating and eliminating health crises as limited health infrastructure prevents governments from applying effective procedures to discontinue the spread of the virus. The global economic implications of the Ebola outbreak are vast, and there will almost certainly be particularly detrimental effects on the future stability of West Africa. As of early October, the World Bank estimated the short-term impact of the outbreak on the economies of Liberia, Guinea, and Sierra Leone to be $359m in forgone GDP. Over the longer term, in Liberia alone, the economic loss could total the equivalent of 12 % of GDP.

Ebola’s first obvious, though significant, economic implication is the death toll, or to use economic terms, the loss of human capital. Numerous sectors of African economies have suffered from this, as decreases in productivity force businesses to endure substantial losses, or even ultimately to shut down. This issue of productivity worsens when considering the emotional pain and family suffering of victim relatives. According to the World Health Organisation, the fatality rate of the current outbreak is approximately 70%, meaning this deadly disease has undoubtedly taken a severe emotional toll on many.

A second factor with frightening economic implications is that 55 to 60% of victims are female, according to the Washington Post. Gendered health outbreaks that disproportionately affect women have disastrous consequences on the long-term social and economic prospects of affected countries, especially in developing nations. Recent gains in gender equality that have been made in Liberia are being threatened, reflecting pivotal set-backs to its national economy. The role women play in development economics is crucial, as they tend to make beneficial investments in families and communities. In order to secure a stable future, Liberia, Guinea, and Sierra Leone will all have to set aside investments from what are now even more limited government revenues, and target funds towards women empowerment. 

Although Ebola domination in the international media coverage has raised awareness and encouraged investment for health resources, it has also been one of the leading factors in stimulating fear. Numerous airlines, including British Airways, Air France, and Emirates have temporarily discontinued many flights to the affected region. Although the outbreak is centred mostly in a relatively small area in Western Africa, misconceptions on transmission and the risks of travelling to Africa have scared the international community and dissuaded much travel throughout the whole continent.  Nations such as the US are increasingly contemplating total travel bans as real possibilities. All such actions have direct and indirect economic costs.

In order to prevent the spread of Ebola, countries most affected have implemented quarantines, while neighbouring countries have imposed restrictions on the movement of people and goods. These mobility constraints will have significant impact on sectors dependent on trade and put pressure on the domestic economy. Decreased imports of affected countries will make resources evermore scarce, causing rising prices of essential foods and medicine that are vital for combatting the outbreak.

According to the Food and Agriculture Organisation, the agricultural industry accounts for 57% of Sierra Leone’s GDP, 39% of Liberia’s, and 20% of Guinea’s. Agriculture has suffered significantly during the Ebola crisis. In Sierra Leone, 66% of the population are farmers, according to the BBC, and so farming labour availability and capacity have greatly diminished. The loss of productivity from workers in this industry has caused agricultural disruption, which has limited the supply of goods to the market. This insufficient supply of staple goods will consequently push up food prices in affected countries and could therefore cause high levels of inflation, affecting the macroeconomic status of these countries as a whole.

Like agriculture, the mining industry is also a large and influential component of affected countries, especially Liberia, constituting 14% of its economy, and Sierra Leone, constituting 17%, according to the Brookings Institution. Various mining firms are now cautious about entering high-risk districts and have even begun to suspend operations and send foreign ‘non-essential’ workers home. Sierra Leone and Liberia have experienced grave impacts on their mining sectors, though Guinea’s industry remains relatively protected from the outbreak since its main operations are not located in high-risk areas.

The fiscal situation within Liberia is also dire, reflected by $30 million in lost government revenues, according to the BBC. In times like these, fiscal spending in health resources and infrastructure is vital; however the Liberia government is doing the opposite, as it is being forced to implement austerity measures due to its enormous fiscal deficit. International assistance by foreign NGOs and governments, such as India, China, the UK, and the US has been sent to affected areas in the form of health workers, financing, and medical research. However, the affected countries remain swamped by fiscal deficit.

History’s worst ever Ebola outbreak will have various social and economic consequences, and may stunt the development of West Africa for some time, especially in Liberia, Sierra Leone, and Guinea. Should these countries encourage airlines and neighbouring countries to lessen restrictions, so as to decrease economic losses? What policies should governments, and international organisations such as the UN, adopt in order to mitigate the economic impact of this devastating health crisis? These are some of the many challenges that must be overcome in order to stop the worst Ebola outbreak the world has ever seen and prevent West Africa from plunging into a state of long-lasting economic disorder.

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