Economic Impacts of Ebola
November 22, 2014
On Wednesday, November 19, the CSIS Global Health Policy Center hosted a discussion focused on the economic impacts of the Ebola epidemic in West Africa. Panelists included David Evans, Senior Economist at the World Bank Africa Region, and Abebe Aemro Selassie, Deputy Director of the International Monetary Fund African Department. J. Stephen Morrison, Director of the CSIS Global Health Policy Center, moderated the discussion. In deliberating the immediate and long-term fiscal implications of this unprecedented outbreak, the conversation centered around three major themes: already observed impacts, the need for immediate containment, and support for governments throughout the response and recovery processes.
The fiscal impacts of Ebola are already pronounced. Overall, 2014 will see a combined loss of $359 million GDP for Liberia, Sierra Leone, and Guinea. While there have been direct disruptions in economic activity due to sickness and death in the wake of the epidemic, the bulk of the impact in West Africa is due to “aversion” behavior changes, particularly the disruption of normal travel, construction, and trade activity. Sierra Leone has seen a stark drop in fuel sales and air traffic, whereas Liberia has seen a sharp decrease in cement sales, marking a discontinuation of construction and infrastructure projects. A mobile phone survey conducted by the World Bank found that nearly half of Liberians working prior to the outbreak are now out of work – this poses a direct threat to household food security, with more than 90 percent of those surveyed concerned that their families would not have enough to eat.
From the government’s perspective, tax revenue in the three most affected has decreased, while overall expenditures have increased in efforts to combat the spread of the disease. In shifting already limited resources towards crisis management, this has further detracted from investments in other sectors of society.
Time is of the essence in mitigating further economic devastation within the three most affected countries and West Africa at large. Both panelists repeatedly stressed that the epidemic needs to be brought under control as quickly as possible. Dr. Selassie mentioned the importance of the IMF’s two-prong strategy: doing everything possible to support containment of the disease, while also working to build back health systems and economies.
Current economic disruptions will persist, and likely worsen, if the epidemic continues to spread. In his presentation Dr. Evans explained, “With swift containment, the impact of Ebola will be sizeable on the three countries, but limited for the region. Without swift containment, the impact for the region could be enormous: $32 billion over just two years.”
The economic impacts have taken a very real and tangible human toll: increases in morbidity and mortality of a range of diseases due to heightened focus on Ebola; rising numbers of children (particularly girls) dropping out of school due to protracted school closures in the midst of the epidemic; and threats to food security due to the timing of the outbreak as well as the potential distortionary effects of external food support. This paints a troubling picture for Liberia, Sierra Leone, and Guinea, countries that even prior to the onset of Ebola had experienced modest economic growth, but still struggled with poor health and development indicators.
An influx of international financial assistance must be matched by support for good governance and accountability. There was praise for the tremendous mobilization of foreign governments and agencies and the recent outpouring of bilateral and multilateral aid. However, this was matched by concern about whether these resources will be used to best manage the crisis and build up the institutional capacity and infrastructure necessary to prevent a future outbreak.
In the wake of deep public distrust, records of malgovernance, and the demonstrated potential for mismanagement of funds in Liberia, Sierra Leone, and Guinea, both panelists called for support from the IMF, World Bank, and other donors in holding these governments to account. Dr. Evans also highlighted the need for improved measures among external funders as well, citing the challenges with donor coordination and transparency in the aftermath of the 2010 Haiti Earthquake.
Within this discussion of accountability, there was much attention given to the question of whether or not the outbreak will have a lasting effect on how governments, both in West Africa and elsewhere, invest in their public health systems. As Ebola has thrived in the wake of weak health infrastructure, it is yet to be seen whether or not the current push surrounding increased investments in health systems will translate into major increases in international and domestic financing for health system capacity.
In the end, both panelists displayed a cautious optimism: while there have been recent successes in containment in Liberia, complacency threatens to heighten the potential for further disease spread and subsequent economic damages. The recovery process in the three most affected countries will not be easy, but a continued robust response and close coordination with government can help to avert a region-wide “worst case scenario” that will take years to reverse.