The deadly outbreak of swine flu and its economic impact

According to BBC, 103 people have died in Mexico but 20 of them are confirmed to have died from the swine flu. There are 20 confirmed cased of swine flu in USA, 6 in Canada, 1 in Spain, and suspected cases are being tested in UK, Israel, Brazil, Australia, and New Zealand.

As a result of this deadly outbreak, the economy of Mexico has come to a halt, as schools, restaurants, and other public buildings are being closed and many people are staying indoors.

BBC further reports that already shares of airlines have fallen, and many tourists are expected to cancel their holidays or travel plans.

As we are very much dependent on the tourism receipts, any negative shock on the world travel and tourism can have a devastating impact on our economy. The annual growth in tourist bed nights has started to fall in December 2008, and in February 2009 there was a 12% decline and a 13% decline in March. Tourist arrivals forecast for this year is already in the negative, and with the swine flu outbreak, we may expect further decline in tourist arrivals, hence reduced tourism revenue, import duty revenue, and other forms of government revenue. This could also badly affect our foreign currency position, and the government deficit.

The economic impacts of this flu world wide may also be devastating. The World Bank has already given $200 million to Mexico to combat the flu domestically. Similar assistance may be required by many other countries if it continues to spread across borders.

Economists and analysts have been forecasting world economic growth to improve by the end of 2009 and at the start of 2010. However, with the swine flu in the horizon, we are talking about possible decline in world travel and other economic activities on top of the money to be spent on curative and preventative measures. This could mean that the world economies may remain in a recession through 2010.