The World Bank projects the economic impact of the Ebola virus disease outbreak in three West African countries will hit US$809 million in 2015 if the disease continues to spread in the worst affected countries alone.
The Bank’s analysis of the Ebola epidemic released Thursday finds that if the virus continues to spread in Guinea, Liberia and Sierra Leone – its economic impact could grow eight-fold, dealing a catastrophic blow to the three fragile states.
The analysis estimates the short-term impact on output to be 2.1 percentage points of GDP in Guinea, which will reduce growth from 4.5 percent to 2.4 percent.
In Liberia, the Bank projects a massive 3.4 percentage points drop in the country’s economic growth progress, cutting growth from 5.9 percent to 2.5 percent.
In Sierra Leone, there will be 3.3 percentage points drop, cutting growth from 11.3 percent to 8 percent. This will cut national production by US$359 million in 2014.
However, if Ebola is not contained, these estimates rise to US$809 million in the three countries alone.
In Liberia, the hardest hit country, the high Ebola scenario sees output hit 11.7 percentage points in 2015, reducing growth from 6.8 percent to -4.9 percent.
World Bank President Jim Yong Kim, said the highest cost of the tragic Ebola outbreak is in human lives and suffering, which has already been terribly difficult to bear.
“Our findings make clear the sooner we get an adequate containment response and decrease the level of fear and uncertainty, the faster we can blunt Ebola’s economic impact,” Kim said in a statement circulated by the Bank.
The Bank approved US$150 million emergency funding to boost the Ebola response Wednesday, adding to the international efforts to combat the disease from spreading.
“We have seen in recent days a serious scaling up on the part of international donors to contain the Ebola epidemic. Today’s report underscores the huge potential costs of the epidemic if we do not ramp up our efforts to stop it now,” said Kim.
Liberia is set to lose US$93 million, equivalent to 4.7 percent of GDP, while Sierra Leone will lose US$79 million, equivalent to 1.8 percent of GDP. Guinea’s loss would become the biggest at US$120 million, leading to 1.8 percent of GDP.
The Bank said slow progress in curbing the spread of the disease would almost certainly lead to even greater financing gaps in 2015.
Bank officials said the “aversion behaviour” driven by the fear resulting from peoples’ concerns about contacting the disease itself is fueling the economic impact more.
The analysis is based on the fact that Inflation and food prices were initially contained but are now rising in response to shortages, panic buying, and speculation.
Those families already vulnerable to food price shocks are becoming increasingly exposed. Exchange rate volatility has increased in all three countries, particularly since June, fuelled by uncertainty and some capital flight.
The analysis finds that the largest economic effects of the crisis are not as a result of the direct costs (mortality, morbidity, care-giving, and the associated losses to working days) but rather those resulting from aversion behaviour driven by fear of contagion.
This in turn leads to a fear of association with others and reduces labour force participation, closes places of employment, disrupts transportation, and motivates some government and private decision-makers to close seaports and airports.
The World Bank said external financing is clearly needed in the three countries. The impact estimates suggest containment and mitigation expenditures as high as several billion dollars would be cost-effective if they successfully avert the worse scenario.