Ebola Resource Center

Ebola Resource Center

October 20, 2014
4 min read
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10 economic consequences of the Ebola crisis

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The 2014 Ebola outbreak is the deadliest in recorded history, with 8,997 cases and 4,493 deaths reported by WHO as of Oct. 16. Recent infection of health care workers in Europe and the United States has only demonstrated how quickly the virus can spread, leaving experts concerned about the disease’s global impact.

This apprehension is not limited to health specialists; economists also are uneasy. A recent statement from the World Bank Group predicted a $32.6 billion loss for the region by the end of 2015 if the virus continues to spread into neighboring African countries. Other experts are attributing a portion of the stock market’s recent downturn to fear and uncertainty concerning the disease.

Here are 10 areas and industries negatively impacted by the outbreak, both in West Africa and beyond.

Agriculture

According to the Food and Agriculture Organization (FAO), the agriculture industry accounts for 57% of Sierra Leone’s GDP, 39% of Liberia’s, 20% of Guinea’s and 22% of Nigeria’s. The price of the staple crop cassava has risen as high as 150% in some areas, while rice and maize harvests later in the year are expected to fall short. This is primarily due to worker health and quarantine zones reducing labor, according to a World Bank report on Ebola’s economic impact.

These factors, along with quarantine-related transport complications, have also disrupted Liberian rubber production. The World Bank estimates 2014 export revenues for the country to fall 20% from an initial prediction of $148 million.

Air travel
Screenings and restrictions for air travel from countries at the heart of the outbreak have limited international flight. Commercial flights to Liberia, Sierra Leone and Guinea have sharply declined since August, according to the World Bank report.

Additionally, Spirit Airlines, American Airlines, Delta Air Lines and JetBlue Airways each saw a short-term drop in stock prices after news that the second US nurse to contract the disease had flown before her diagnosis, according to NASDAQ reports.

The CDC has since issued guidelines for airline travel and staff procedures to limit the virus’ spread.

Oil drilling

In a press conference on Oct. 2, ExxonMobil CEO Rex Tillerson said that plans to drill offshore Liberia were disrupted by Ebola concerns. The company is prohibiting some employees from traveling to countries involved in the outbreak.

While construction of the planned exploration well was postponed, other drilling activities from ExxonMobil will continue as planned.

Chocolate production

Approximately two-thirds of the world’s cocoa production comes from Ivory Coast and Ghana, according to the FAO. Although the outbreak has yet to become widespread in either country, harsher border restrictions affecting migrant workers have, much like other industries, resulted in restricted laborer availability, according to the World Bank. The effect is even stronger within outbreak countries, especially for Sierra Leone’s heavily agriculture-focused economy.

The World Cocoa Foundation and its members recently announced that $600,000 in aid was donated to help battle Ebola in West Africa.

Hospitality

With a reduction in international leisure and business travel comes a decrease in hospitality revenue.

According to the World Bank report, average hotel occupancy in Liberia has dropped from over 70% to around 30%, with some hotels seeing as little as 10%. The service sector in Sierra Leone, which makes up 30% of the country’s economy, is also experiencing a similar reduction in business, leading both countries’ industries to reduce hours or lay off staff.

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Tourism

World Bank data concerning reduced commercial flying and low hotel occupancy rates within outbreak countries translate into a decline in tourism income. However, the rest of the continent is also feeling Ebola’s effect on their tourism industries.

A survey from Netherlands-based travel website safaribookings.com reported many safari operators are experiencing a 20% to 70% decrease in business. Meanwhile, Korean Air halted flights to and from Kenya in August to prevent the spread of the disease to Asia via vacationers.

Mining

Mining activity makes up 14% and 17% of Liberia’s and Sierra Leone’s economies, respectively. With the outbreak, Australian-based Tawana Resources announced in a project report that it suspended or scaled back operations in high-risk areas while supporting local efforts to contain the disease. Meanwhile, the unavailability of migrant laborers due to border restrictions adds to the estimated losses for iron ore and artisanal mining of gold and diamonds, according to the World Bank.

Finance

The World Bank expressed concern about capital flight within heavily infected countries within their report. Many wealthy Guineans, expatriates and job-providers leaving the region, along with their deposits, would both remove capital from the country and heavily affect exchange rates.

Of greater concern, according to the report, are short-term fiscal deficits. Revenue shortfalls, reduced economic activity and increased public expenditures within West African countries have resulted in a regional 2014 finance gap of over $290 million — an effect that would only continue with the outbreak’s progression into 2015.

Health care insurance

If the spread of Ebola in the US reaches epidemic status, some insurers could see payouts above expectations. Although Texas Health Presbyterian Hospital has not disclosed the full cost of treating the first US patient to die of the disease, his placement in an isolation ward would have been more costly than standard treatment.

Despite this, the threat should ultimately be manageable for the private health insurance system, according to a publication from the Insurance Information Institute. The group said that due to the large number of death claims made annually, “another 100,000 would be only 5% more than typical.” Along with noting that frequent Ebola testing and patient isolation would be costly, the group wrote that an increase of cases would most likely reduce profits, not remove them.

School closures

Following the diagnosis of the second Ebola patient to contract the disease in the US, schools in Texas and Ohio closed for cleaning when students and staff were discovered to have been on the same flight as the patient. Closures that result in parents staying home with their children reduce productivity. Although these schools are scheduled to stay closed for just a few days, long-term closure on a larger scale has the potential to reduce earnings and GDP, according to a study from the Brookings Institution.