Ebola’s Long Tail of Devastating Economic Harm
Business + Economy

Ebola’s Long Tail of Devastating Economic Harm

“Women in Sierra Leone are choosing not to go to market to sell their crops. Traders from [the Ivory Coast] are choosing not to travel to Liberia to sell food. International mining companies are pulling out their expatriate staff and scaling back operations. All of these [actions] have significant economic impact both for the countries with infected individuals and for their neighbors.” – David Evans, World Bank Economist

The outbreak of Ebola in West Africa is threatening not just the lives of the people there but entire livelihoods – and the impact could be far reaching.

The World Bank warned that the West African countries of Sierra Leone, Guinea, and Liberia would lose a combined $359 million this year alone from the epidemic - money they can't afford to lose. The three countries, which account for most of the 4,900-plus deaths to date from the epidemic, stand to lose hundreds of millions as well in 2015 if Ebola isn't contained. Even larger monetary losses are possible for the entire region and its global trading partners. 

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Guinea’s GDP would have grown 4.5 percent this year but will now only grow 2.4 percent, the report from the World Bank says. It also says the crisis will stunt Liberia and Sierra Leone’s GDP growth in 2014 by 3.4 and 3.3 percentage points respectively. Beyond these economic losses, the report forecasts an additional loss of up to $815 million next year if the outbreaks persist.

This would reverberate well beyond the three countries: Western Africa as a whole could lose anywhere from $1.6 billion to $25.2 billion between now and 2015, says the World Bank.

The report calls on the global community to up its investments in Ebola response efforts and treatments. “With the potential economic costs of Ebola being so high, very substantial containment and mitigation expenditures would be cost-effective if they successfully avert the worst epidemiological outcomes,” the report says.

David Evans, a World Bank senior economist and the report’s co-author, says Ebola’s economic harms stem not so much from direct deaths but from the climate of fear that now exists. Many local businesses have scaled back their operations, he said, because wary local consumers have been avoiding the marketplaces in order to avoid those who may have the virus.  

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While Guinea, Liberia and Sierra Leone together account for only 2 percent of the GDP of sub-Saharan Africa – the situation could affect businesses outside these countries. Airline traffic and tourism to the region are already declining, said Evans.

West Africa is also home to several major raw commodities exporters. Bauxite, a key ingredient of aluminum, could see price hikes, as Guinea is a significant bauxite exporter. The nearby Ivory Coast is the world’s leading cocoa exporter – and in September alone, the price of Ivory Coast cocoa increased more than 10 percent.

Liberia has nascent mining, timber, and oil industries – and they and their investors stand a chance of substantial profit losses. The Liberian mining sector is suffering an Ebola-attributable contraction of 1.3 percent this year, the World Bank report said. ArcelorMittal, the country’s largest mining company, has put all new mining endeavors on hold; China Union, the second largest, has closed its operations altogether.

Other business contractions in neighboring countries are possible depending on how severe the epidemic becomes, Evans said.

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Some neighboring countries are weathering the crisis pretty well. The World Health Organization (WHO) declared both Senegal and Nigeria Ebola-free this month, as both had gone more than 42 days without any reported infections after initial outbreaks in July and August.

Daniel Epstein, a WHO communications officer, attributes the successes of Nigeria and Senegal to early action in identifying infected individuals, ushering them into secure medical centers, and treating and monitoring them along with monitoring any people who had been in contact with them. Early intervention also raises the odds of survival. Roughly 30 percent of the infected survive.

“The key is to be alert and to do what Nigeria and Senegal did, which is to catch and isolate the first few cases,” Epstein said. “If countries do that, they’ll be better able to control the outbreaks.”

Systems to monitor and respond to disease outbreaks are poor in much of the region due to shortages of funds and resources, said David Gartner, a development assistance researcher at the Brookings Institution. That’s why he’s only cautiously optimistic about Nigeria and Senegal’s successes: Until health care infrastructure in the other countries improves, the danger of new outbreaks crossing their very porous borders remains.

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Many recent cases have occurred on the Liberian side of the Liberia-Ivory Coast border, he noted. So while the Ivory Coast is Ebola-free now, that could change. “One could imagine the Ivory Coast and Senegal not being lucky in the future,” he said. “The risk to neighboring countries remains great.”

Meanwhile, the U.S. government has responded to West Africa’s Ebola crisis by approving more than $1 billion in emergency-response funds, of which it has allocated $300 million so far, said the State Department. That’s on top of the stream of private-sector donations flowing to the affected countries, such as the recent $100 million grant the Paul G. Allen Foundation committed last week.

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