The price of pandemics

The COVID-19 crisis stopped economies across the globe in their tracks, but it’s far from being the only outbreak to have shaken the world in the past. From Spanish Influenza to SARS, we look into the costs of previous epidemics and pandemics, and how economies recovered in the aftermath


In April 2020, as the impact of the coronavirus crisis took hold, the IMF predicted “the worst recession since the Great Depression.” It stated that “the cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around $9trn,” forecasting a global economic contraction of three percent over the year. Two months later, the World Bank said we could expect a 5.2 percent contraction across the world.

In the UK, GDP ended up declining 9.8 percent in 2020, the steepest plunge since records began in 1948, and the biggest in more than 300 years, according to estimates. In the US, the economy shrank by 3.5 percent, marking the worst year since 1946. The average unemployment rate in the country meanwhile hit 8.1 percent – the highest annual rate since the wake of the financial crisis in 2012.

Hope on the horizon
Thanks in large part to vaccine rollouts, the outlook has improved significantly since 2020; in a Global Economic Prospects report in June 2021, the World Bank projected global growth of 5.6 percent this year, indicating the fastest post-recession rebound in 80 years.

Unemployment in the US fell to 4.8 percent in September, and businesses are fast recovering; for the first time since July 2004, half of respondents in a recent McKinsey Global survey said they expected their company’s workforce to grow over the next six months. Those businesses also anticipate being more resilient; nearly three-quarters said their organisations were more prepared for future crises now than they were before the pandemic.

Countries will need to work together to get trade back up and running and deliver vaccines to a larger portion of the world if the global economy is to recover on a more even scale

And the world has learnt a few lessons too, according to Dennis Carroll, Senior Advisor in Global Health Security at the University Research Co. (URC). “The COVID-19 response has shown us that in order to prevent future pandemics, we need to embrace as a core guiding principle the idea that a threat anywhere is a threat everywhere,” he told World Finance. “Only through a coordinated global response will we be able to ensure a newly emerged threat can be stopped before it becomes a pandemic. Addressing issues of trade also cannot be solved at the national level.”

It’s far from over, of course; recovery is unevenly spread, swayed towards countries with greater access to vaccines (90 percent of advanced economies are expected to regain their pre-pandemic per capita income levels by 2022, according to the World Bank report, compared to only a third of EMDEs).

Countries will need to work together to get trade back up and running and deliver vaccines to a larger portion of the world if the global economy is to recover on a more even scale. It’s also difficult to predict how the virus will fare in the coming months and beyond. “The recovery is not assured,” reads the World Bank’s report. “The possibility remains that additional COVID-19 waves, further vaccination delays, mounting debt levels, or rising inflationary pressures deliver economic setbacks.”

How exactly things pan out remains to be seen – but while coronavirus might be the biggest pandemic we’ve experienced in our lifetime, it’s not the only one history has witnessed. So what can we learn from previous outbreaks and the economic effects they’ve brought about? From Spanish Influenza to Zika, SARS to Swine Flu, we’ve sought out some of the biggest epidemics and pandemics from the past century, and explored just how much they cost national and global economies at the time.


Spanish Influenza
Timeline: 1918–1920
Origin: Unknown

Considered the deadliest pandemic in history and claiming an estimated 20–50 million victims – while infecting a third of the world’s population – Spanish influenza didn’t only devastate lives; it brought down cities across the globe in a way not dissimilar to COVID-19, with many public places shut down in the US and beyond in early 1919.The pandemic caused widespread labour shortages, exasperated by the fact a disproportionate number of its victims were of working age (15 to 44). Manufacturing output in the US fell by 18 percent, while real GDP per capita dropped 6.2 percent across the globe.In the US, grocery sales fell by a third and sales at merchants and department stores dropped 40–70 percent, according to an article in the Arkansas Gazette in October 1918. A report in the Commercial Appeal meanwhile found that coal mine production in Tennessee had dropped by half.Spreading in three waves in 1918 and 1919, and accelerated by the return of First World War veterans from overseas, the effects on both lives and economies were to last for many years. While the exact numbers are hard to quantify, partly due to a lack of historical data and partly its convergence with the war, the pandemic has since been called the fourth most adverse macroeconomic shock since 1870, after World War II, the Great Depression and World War I.


Timeline: 2002–2003
Origin: China

Roll on nearly a century – via the Asian Flu of 1957 and the Hong Kong Flu of 1968, among several other outbreaks – and SARS was born. When the virus emerged in China in 2002, rapidly spreading to Australia, Brazil, Canada, China, Hong Kong, South Africa, Spain and the US, concerns over its impact on both lives and economies were immediate. While it was contained within a year, registering around 10,000 infections and less than 1,000 deaths in total, the economic costs were stark. The outbreak reduced global GDP by $33bn, according to the World Bank, while China alone is estimated to have lost around $14.8bn, the US more than $7bn and Canada around $5bn.Airlines were among those hardest hit, with Asia-Pacific airlines losing $6bn on the back of a dramatic drop in the number of business and leisure travellers flying, according to the International Air Transport Association (IATA), and North American carriers registering $1bn in losses. Tourism was another victim; net revenue of Park Place Entertainment, which owns Las Vegas’ Caesar’s Palace and other hotels, tumbled more than 50 percent year-on-year in the second quarter of 2003 as the Asian market slumped, while bars, shopping centres, cinemas and other indoor public places closed in Beijing amid a country-wide lockdown.A 2008 study; The economic impact of SARS: How does the reality match the predictions? concluded that China lost out on an estimated $3.5bn in domestic tourism that year, while Hong Kong’s restaurant sector saw estimated losses of $260m.But authors of the study, Marcus Richard Keogh-Brown and Richard David Smith, are cautious of over-estimating the impact of SARS alone, pointing to other influences at the time that added to the economic burden – not least the conflict in Iraq – and noting the rapid recovery seen after the outbreak ended. “SARS did have a notable effect on certain sectors of some East Asian and the Canadian economies,” they wrote. “However, these losses correspond only to the relatively short period of the disease outbreak, after which consumer confidence returned and many stocks that had diminished were replenished and some purchases which were forgone at the height of the outbreak were made after the perceived risk was reduced.”

That presents some hope for a post-Covid recovery and one that’s already being seen; in June, the World Bank forecasted “the most robust post-recession recovery in 80 years in 2021,” with global growth expected to accelerate 5.6 percent this year thanks to the loosening of restrictions and reopening of venues across the world. How reality plays out in the coming months and years remains to be seen, however.


Swine Flu
Timeline: 2009–2010
Origin: North America

If SARS taught the world lessons in how to mitigate a potential global pandemic, H1N1 – or Swine Flu, named for its origins with North American pigs – was the ultimate test. First documented in Mexico on March 17, 2009, the virus quickly spread throughout the country and the US, circulating the globe in two waves before officially ending in August 2010. The last disease to have been declared a global pandemic by the WHO before the coronavirus crisis, it gave economists a brief insight into the damage COVID-19 could cause – albeit with a less fatal profile, killing an estimated 150,000 to 575,000 people and infecting between 700 million and 1.4 billion across the world.While its convergence with the financial crisis makes its real impact hard to quantify, data from the World Bank estimates that global losses likely totalled somewhere between $45bn and $55bn. Those costs stemmed from multiple factors, including direct costs as well as significant declines in several industries, including food, transport and tourism. Mexico alone registered a million fewer visitors in 2009, according to the data, leading to more than $1bn in lost tourism, while stock markets crashed and economists feared an extension to the global recession. In Canada, the virus is estimated to have cost the economy $1.6bn, according to a 2010 report by the Canadian Institute for Health Information, including $162m in care of hospitalised patients and $40m in emergency department visits. Other estimates put lost GDP in affected countries at between 0.5 percent and 1.5 percent.But preparedness, sparked partly by SARS, helped in containing the virus; the US, UK and Australia closed schools, while Canada witnessed the biggest vaccination programme in its history, investing $400m in buying 50 million doses of the H1N1 vaccine. Those school closures might have been costly – a study in New York found that closures meant at least one adult had to miss work in 17 percent of households – but they likely paid off.Research early on in the outbreak by Warwick McKibbin, a senior fellow at the Brookings Institution, found that a worst-case ‘ultra scenario’ could shave $4trn off the global economy. Thanks in part to efforts against contagion, that didn’t happen. But researchers Patrick Saunders-Hastings and Daniel Krewski warn against complacency. “Overall, the 2009 H1N1 pandemic was a mild, albeit costly, global virus,” they wrote in a study, Reviewing the History of Pandemic Influenza: Understanding Patterns of Emergence and Transmission.“While it has reinforced optimism about pandemic preparedness, it should not necessarily be seen as predictive of future pandemic severity.” And indeed it wasn’t; estimated losses from COVID-19 have already reached the trillions, at least rivalling the ‘ultra scenario’ feared for Swine Flu, and it isn’t over yet. But if it wasn’t for the lessons taught by outbreaks like H1N1, the world might be in a far worse position still.


Timeline: 2014
Origin: Guinea

In October 2014, the World Bank said the Ebola outbreak – concentrated in Guinea, Liberia and Sierra Leone – could cost the economy $32.6bn by the end of 2015 in a worst-case scenario. The following month, forecasts had been reined in to $3–4bn, and the following year, total losses were estimated to have been a significantly smaller $2.8bn.But a study published in the Journal of Infectious Diseases in 2018, taking into account social effects and longer-lasting impact as well as the direct losses, put the figure up to a staggering $53bn. It found the biggest losses were for deaths caused by other diseases as Ebola took healthcare resources and hospital beds. Healthcare costs totalled $26m, while mitigation measures came in at $67m.Among the biggest blow, though, was the loss in trade as borders closed (totalling $2.8bn, according to the study). Guinea’s trade with Senegal and Sierra Leone – which relies heavily on cocoa exports – was shut off, while Liberia’s trade with the Ivory Coast was also curtailed. International border closures, flight restrictions (many countries suspended flights to the three worst affected countries) and declines in exports, taxes and business exacerbated the impact. Sierra Leone’s mining industry – the mainstay of the economy, accounting for 75 percent of the country’s 20 percent growth in 2013, according to the IMF – was meanwhile dealt a blow due to restricted movement of workers.While direct costs were clearly unavoidable, what’s interesting is that mitigation measures, restricted movement, border closures and other behaviours driven by concern caused the biggest financial drain, according to the World Bank. “The analysis finds that the largest economic effects of the crisis are not as a result of the direct costs… but rather those resulting from aversion behaviour driven by fear of contagion”, reads a statement in September 2014. “This in turn leads to a fear of association with others and reduces labour force participation, closes places of employment [and] disrupts transportation.”

That’s the central crux of almost every epidemic – the World Bank attributes 80 to 90 percent of the economic impact of recent epidemics to behavioural factors rather than to the diseases themselves. More than 11,000 lives were lost to Ebola, but many more were impacted by its devastating economic toll. That’s a story that clearly rings true in the coronavirus crisis, and striking the balance between saving lives and saving the economy has been one of the biggest debates of our time. Governments will likely need to continue walking a very fine line for years to come.


Timeline: 2015–2016
Origin: Brazil

In February 2016, the World Health Organisation declared the Zika virus – which began in Brazil and is mosquito-borne – a public health emergency of international concern. The virus, which can cause microcephaly and other congenital conditions in babies of pregnant women, soon spread to the surrounding region and beyond, leading the World Bank to foresee an economic impact of $3.5bn in Latin America and the Caribbean that year. But adding in social impacts, researchers from the John Hopkins Carey Business School put the figure somewhere between $7bn and $18bn.It wasn’t only Latin America and the Caribbean that had cause for concern – a study published in the journal PLOS Neglected Tropical Diseases by Dr Peter Hotez looked at the potential economic toll on the US if the epidemic were to spread. It concluded that costs could range from $183m to more than $1.2bn depending on infection rates in Florida, Alabama, Texas and other southern states at risk. In response to concerns, Obama requested $1.8bn from Congress in federal funding for prevention, $1.1bn of which was authorised.While loss of worker productivity, public perceptions of Zika and the costs of action needed were all taken into account in the World Bank’s estimations, by far the biggest portion once again came from its potential impact on tourism – the analysis predicted a 1.6 percent drop in GDP for countries reliant on overseas visitors, explaining why Mexico, Cuba, the Dominican Republic and Brazil stood to lose the most ($744m, $664m, $318m and $310m respectively, according to the forecasts). Many feared its impact on the Rio Olympics, but the WHO rejected a call to postpone the games on the grounds that it would “not significantly alter” the spread of the virus (and it didn’t; no cases of Zika were reported by foreign visitors following the event). The impact on tourism was smaller than expected as a result; 410,000 foreigners still came for the games – falling only slightly short of the 480,000 originally projected by the Olympic Committee – accounting for seven percent of the country’s annual tourism volume.Tourism to the Caribbean was also less heavily impacted than feared, according to Travel + Leisure magazine editor-in-chief Jacqui Gifford, who put it down to the fact that only a small sector of the market was affected by the virus. “There was a little bit of a dip when it came to the Caribbean and Brazil,” she told CBS News in 2019. “But we’re really talking about a specific market and a specific type of traveller – pregnant women obviously and couples that were thinking of conceiving.”

In the end, the number of cases was significantly smaller than initially feared; from 2015 to 2018, the Americas registered 220,000 confirmed cases and 580,000 suspected cases, according to data from the Pan American Health Organisation and the WHO. That’s compared to initial forecasts of up to four million cases in Latin America and the Caribbean, and up to 117 million globally. Mainland US registered 224 cases in 2016 and only seven in 2017, while Europe escaped unscathed. If that proves anything, it’s that epidemics can be as financially unpredictable as they are potentially devastating – and weighing up potential risk with reality is where the true challenge lies.