## The Economic Risks and Impacts of Epidemics

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**Canonical URL:** [The Economic Risks and Impacts of Epidemics](https://www.imf.org/en/publications/fandd/issues/2018/06/economic-risks-and-impacts-of-epidemics-bloom)

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## Bibliographic details
- Authors: DAVID E BLOOM, DANIEL CADARETTE, JP SEVILLA
- Published: June 1, 2018
- Volume: 55

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### Overview
- New and resurgent infectious diseases can have far-reaching economic repercussions.
- Infectious diseases include long-standing pathogens (for example, the plague), newer pathogens (for example, human immunodeficiency virus (HIV)), endemic diseases (for example, tuberculosis and malaria), and fluctuating diseases (for example, influenza).
- Outbreak classifications: outbreak (sharp increase in a limited area or population), epidemic (sharp increase covering a larger area or population), pandemic (epidemic covering multiple countries or continents).
- Publication details: F&D Magazine; Epidemics and Economics; DAVID E. BLOOM, DANIEL CADARETTE, JP SEVILLA; June 2018; Less than a minute(0 words) Read.

### Economic channels and impacts
- Health system costs: medical treatment of the infected and outbreak control can overwhelm public and private health systems and limit capacity for routine health issues.
- Labor and productivity: illness and caregiving reduce labor supply and effectiveness, driving down productivity.
- Behavioral responses: fear of infection can cause social distancing, school closures, enterprise and public service shutdowns, and disruptions to transportation and commercial activity.
- Trade and investment: concern over spread can reduce trade (example: EU ban on British beef lasted 10 years after a mad cow disease outbreak) and deter travel, tourism, and foreign direct investment.
- Sectoral heterogeneity: some sectors may benefit (for example, pharmaceutical firms producing vaccines), while others bear heavy costs (for example, health and life insurers; livestock producers during animal-linked outbreaks).
- Distributional effects: vulnerable populations, particularly the poor, are likely to suffer disproportionately due to less access to health care and lower savings.

### Quantified risks and illustrative examples
- Estimated expected yearly cost of pandemic influenza: roughly $500 billion (0.6 percent of global income) — estimate attributed to Victoria Fan, Dean Jamison, and Lawrence Summers.
- Liberia: GDP growth declined 8 percentage points from 2013 to 2014 during the Ebola outbreak in west Africa, even as the country’s overall death rate fell over the same period.
- WHO epidemic-priority list: published December 2015 and updated twice, most recently in February 2018.

### Drivers and complicating factors
- Rapid transmission across borders requires timely responses.
- Globalization, climate change, and urbanization elevate epidemic potential.
- Climate change expands habitats of vectors such as Aedes aegypti (vectors for dengue, chikungunya, Zika, yellow fever).
- Urbanization and slum growth increase population density and worsen sanitation and access to clean water.
- Antimicrobial resistance: proliferation of pathogens resistant to antimicrobials (including potential pan-drug-resistant superbugs) increases global risk.

### Managing epidemic risk — prevention, mitigation, and response tools
- Prevention and resilience:
  - Invest in improved sanitation, clean water provisioning, and better urban infrastructure to reduce human contact with pathogens.
  - Build strong health systems and support proper nutrition to improve baseline health and reduce susceptibility.
  - Protect spending on basic systems, services, and infrastructure even when budgets are constrained.
- Surveillance and early detection:
  - Invest in reliable disease surveillance in human and animal populations.
  - Develop incentives within formal global surveillance systems to encourage reporting of suspected outbreaks.
  - Leverage informal surveillance systems (for example, ProMED and HealthMap) and social media for early detection.
  - Collaborate through initiatives such as the Global Health Security Agenda and the Joint External Evaluation Alliance to monitor national readiness.
- Containment and clinical response:
  - Consider quarantines for highly virulent and highly transmissible diseases, with attention to human rights implications.
  - Plan rationing strategies for limited biomedical countermeasures and decide prioritization in advance (for example, first responders versus vulnerable groups).
  - Prioritize development of better and less-costly treatments, including novel antibiotics and antivirals.
  - Prioritize development and distribution of new and improved vaccines.

### International collaboration and market failures
- Vaccine market failure:
  - Low-probability, high-severity pathogens create weak private incentives for vaccine R&D due to high costs, delayed returns, and uncertain demand.
  - International, farsighted collaboration can overcome this market failure.
- Example: Coalition for Epidemic Preparedness Innovations (CEPI)
  - Supported by the governments of Australia, Belgium, Canada, Ethiopia, India, Japan, Germany, and Norway, as well as the European Commission and various nongovernmental funders.
  - Goals: advance candidate vaccines against specific low-probability, high-severity pathogens to proof of concept; enable rapid clinical testing and scale-up; fund development of institutional and technical platforms to speed R&D for pathogens without existing vaccines.
  - Similar funding models could support development of a universal influenza vaccine.
- Access and equity concerns:
  - Assured access to vaccines for at-risk populations is necessary to realize benefits and to motivate developing economies to participate.
  - 2007 example: Indonesia withheld samples of the H5N1 influenza virus from the WHO to protest that companies in wealthy countries used samples provided by developing economies without returning profit or special benefits to donors.
- Centralized stockpiling:
  - Internationally coordinated stockpiling of vaccines and drugs can be more efficient than individual national stockpiles and promote equitable deployment where needed.
  - Wealthy countries, even if at relatively low health risk, can suffer disproportionately large economic losses from faraway epidemics due to the size of their economies and trade reliance.

### Economic instruments and preparedness measures
- Insurance mechanisms can distribute economic burden across sectors and regions, similar to natural disaster responses.
- Prioritizing personnel such as health care workers, military, and public safety employees for biomedical countermeasures can protect critical economic resources.
- Continued research into pathogens likely to spread and have large impacts is recommended.

### Concluding assessment
- Uncertainty: the next major epidemic’s pathogen, origin, and severity cannot be predicted.
- Certainty: outbreaks and epidemics will occur as long as humans and infectious pathogens coexist and will impose significant costs.
- Policy prescription: proactive, concerted action at local, national, and multinational levels can manage risks and mitigate impacts through prevention, surveillance, R&D, equitable access, and international cooperation.

*Source: The Economic Risks and Impacts of Epidemics — F&D Magazine, June 2018, DAVID E. BLOOM, DANIEL CADARETTE, JP SEVILLA.*

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_Source: https://www.imf.org/en/publications/fandd/issues/2018/06/economic-risks-and-impacts-of-epidemics-bloom_