During a press conference in Mexico yesterday in which the Mexican health minister was speaking, an earthquake briefly interrupted proceedings. You couldn’t have made it up. Or at least, if Hollywood made a film about some new killer virus, and introduced an earthquake, the critics would have slammed it.
But in a way, it is like that with the economy. Here we are in the midst of the worst economic crisis since the Wizard of Oz was made, and all of a sudden we get this pandemic.
Markets didn’t like it, but then there were winners too. Meanwhile, economists have been busy trying to work out what it will all cost.
The whole crisis has been rather good for the pharmaceuticals. Roche Holdings make Tamiflu, while GlaxoSmithKline make the other drug which is supposed to be effective, Relenza.
By the way, there have been reports of nasty side effects associated with the drugs. According to a report on Bloomberg last year, evidence from Japan has suggested that some people taking Tamiflu suffered delirium, hallucinations or psychosis – although the report did say experts were not sure if these effects were caused by the drug, or the virus.
Shares in both companies rose sharply yesterday. Novartis and AstraZeneca make vaccines for old-fashioned flu. Although it is questionable how relevant these vaccines are to this new strain, shares in both these companies rose too.
Meanwhile, shares in airlines and other travel-related companies fell. In London, British Airways tumbled 7.8 per cent, while cruise company Carnival, and Thomson and InterContinental hotels all saw big drops
Attention has now focused on a report from the World Bank released last year which warned that a flu pandemic could cost around 4.8 per cent of global GDP, or around $3 trillion. Then again, the report assumed 1 per cent of the world’s population would die. It has happened before. After the First World War there were around 50 million deaths. But it does seem that today, in the world’s richer countries, improved diets, improved health facilities and stockpiles of medication mean that such a nightmare scenario is unlikely. Although, the consequences for Africa could be very nasty indeed.
SARS has helped. This has forced governments across the world to make improved preparations for the next scare. It seems SARS was an important learning experience.
As was warned here yesterday, it seems the real economic costs won’t so much come directly from the virus, but rather accrue from the measures taken to avoid the virus. If people stay at home, avoiding crowds, meaning less use of public transport and enclosed shopping centres, then the economic consequences will be serious.
But, when we miss a few days off work, we usually find we have to make it up when we return and work a little bit harder. Once the crisis is over, we may find a mini economic boom occurs as we all try to make up for loss of production.
© Investment & Business News 2013