Ebola threatens economic gains in affected countries
Foreign workers are
going home and businesses retreated due to contagion fears.
by Kingsley Ighobor
The economic impact of the Ebola virus outbreak in the most affected
countries - Guinea, Liberia and Sierra Leone - is still unravelling.
Figures are being collected and it is still unclear when the deadly
virus will be contained. Even the most optimistic projections paint an
uncertain economic future for those countries.
Even before the Ebola outbreak, these three West African countries
were among the world's poorest. The 2014 UN Development Program's (UNDP)
Human Development Index, which ranks countries based on income, life
expectancy, education and quality of life, placed Sierra Leone 183 out
of 187 countries, Guinea at 179 and Liberia at 175.
The fear is that Ebola could eat away at the slim improvements that
new investments have produced.
A World Bank study on the economic impact of the Ebola epidemic in
2014 identified two possible scenarios.
An Ebola victim |
The first scenario is "Low Ebola" - when the disease is contained by
early 2015, cases stay around 20,000 and economic activity gradually
increases; the second scenario is "High Ebola" - when the disease is
contained more slowly, cases reach up to 200,000 people and the outbreak
worsens significantly into 2015. The bank observes that in the "High
Ebola" scenario, West Africa's gross domestic product (GDP) could suffer
a $32 billion loss by 2015; in the "Low Ebola" scenario, GDP loss for
the region could be about $4 billion.
In a "Low Ebola," Guinea's GDP would contract to 2.4 percent from 4.5
percent; Liberia to 2.5 percent from 5.9 percent; and Sierra Leone to 8
percent from 11.3 percent. Clearly, the wheels are coming off these
economies.
"The Sierra Leonean economy has been deflated by 30 percent because
of Ebola," Joseph Sesay, the country's agriculture minister, told the
BBC.
A UNDP report, "The Economic and Social Impact of Ebola Virus Disease
in Sierra Leone", warns that Ebola could wipe out post-war economic
gains in the country.
Currently, there are food shortages even as the local currency, the
leone, is depreciating at a fast pace.
In Liberia, the price for a bag of rice, the staple food, increased
from $28 to $35 since the epidemic began.
The price of fish also increased following the government's warning
against eating "bush meat", a local favourite. Sanitary products such as
plastic buckets and chlorine are now more expensive than before the
Ebola outbreak.
Foreign investors are withdrawing in droves from worst-hit countries.
ArcelorMittal, the world's leading steelmaker, recently moved its
expatriate staff out of Liberia. London Mining, a British company, also
removed staff from Sierra Leone.
Without iron ore, Sierra Leone's growth output, which was 20 percent
in 2013, will fall to 5.5 percent, according to the International
Monetary Fund (IMF), stressing how critical the iron ore sector is to
the country's economy. Fearing for staff safety, a number of
international non-governmental organizations in Liberia have also closed
their operations.
There is no confirmed Ebola case in Ghana but that hasn't stopped
mining firms from evacuating foreign staff and slowing down their
operations.
Business Day, a Ghanaian publication, reports that top hotels in
Accra, the capital city, which are usually almost full, now have just a
30 percent occupancy rate.
Ghana and Côte d'Ivoire produce 60 percent of the world's cocoa, a
sector also threatened by Ebola. There are fears that Ebola could spread
into these countries.
"Any threat of that virus disrupting the flow of harvested cocoa
beans out of the producing regions could threaten to increase cocoa
prices once again," says research analyst Nitesh Shah of ETF Securities,
a London-based investment firm. By mid-October 2014, due to a drop in
production caused by Ebola, international cocoa prices had surged by
18.5 percent.
The Ebola virus has also affected infrastructure projects. For
example, a highly anticipated World Bank-funded road project linking
Liberia and Guinea was suspended and the contractor, China Henan
International Cooperation Group, pulled out its workers.
In addition, with border closures and travel bans around the region,
intra-sub-regional trade, already at an abysmal 12 percent, is likely to
get worse.
"We used to import goods from Nigeria to sell here [Sierra Leone],
now we cannot do that because there are no flights," says Chris Eyen, a
Freetown-based businessman.
In addition to flight cancellations, most shipping lines are no
longer berthing in Liberia.
Other countries in the region are experiencing a ripple effect.
The Gambia, which derives 16 percent of its GDP from tourism, is
seeing up to a 65 percent decline in tourism receipts, according to
Benjamin Thomas, the country's tourism minister.
And in Senegal, with fewer tourists, its GDP could contract by 1
percent, notes the World Bank. Economists may be ringing the alarm
bells, but many development experts say there's no need to press the
panic button.
The World Bank is calling for a swift national and international
response to mitigate Ebola's economic impact.
Already, the IMF is providing $130 million emergency relief to
Ebola-hit countries even as the US wants the fund to augment that amount
with a $100 million debt relief.
At the last G20 meeting in Brisbane, Australia, held in mid-November
2014, leaders of the world's leading economies backed the IMF relief
fund.
Donors are scaling up their support, says World Bank President Jim
Yong Kim.
The UN initially appealed for one billion dollars to fight Ebola of
which $800 million had been received by mid-November, according to David
Nabarro, the UN system coordinator for Ebola virus disease.
Dr. Nabarro said that up to $1.5 billion was now needed.
There is a sense of urgency in global efforts to contain the virus,
but there is also an understanding that revamping economies devastated
by Ebola could prove challenging.
- Third World Network Features
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