As health experts continue to evaluate the severity of the swine flu outbreak, we thought it would be interesting to take a look at what the economic consequences of this scare might be.

In 2005, World Bank economist Milan Brahmbhatt studied the economic impact of the SARS scare in East Asia:

Interestingly, the most immediate economic impacts of a pandemic might arise not from actual death or sickness but from the uncoordinated efforts of private individuals to avoid becoming infected. This at least was the experience during SARS, when people tried to avoid infection by minimizing face-to-face interactions, resulting in a severe demand shock for services sectors such as tourism, mass transportation, retail sales, hotels and restaurants, as well as a supply shock due to workplace absenteeism, disruption of production processes and shifts to more costly procedures. This led to a an immediate economic loss of perhaps 2% of East Asian regional GDP in the second quarter of 2003, even though only about 800 people ultimately died from SARS. Note that a 2 percent loss of global GDP during a global influenza pandemic would represent around $200 billion in just one quarter (or $800 billion over a whole year), and it is fair to assume the immediate shock during a flu epidemic could be even larger than in SARS.

So whether it’s staying home from work, refusing to ride on mass transit, or avoiding retail spaces like restaurants and malls, a flu scare could have a devastating economic impact even if there don’t turn out to be very many deaths from swine flu in America.

On the other hand, if the swine flu mutates into a deadlier form, the economic impact in a time of recession could be much more severe.

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