Bird Flu Alarm

2006-04-13-Canada Says Bird-Flu Pandemic Would Cut GDP Less Than Expected

Understanding Avian Influenza

2006-04-13-Canada Says Bird-Flu Pandemic Would Cut GDP Less Than Expected

Canada's economic growth would slow by about 0.90 percentage points in the event of a severe bird- flu pandemic similar to the 1918 flu outbreak, government officials said in a brief prepared for Finance Minister James Flaherty.

"A 1918-type influenza pandemic today would likely have a smaller aggregate economic impact than some analysts have claimed," the Finance Department economists said, according to an April 10 report. The document updates a January study obtained by Bloomberg News under access-to-information rules.

Analysts such as Sherry Cooper, chief economist with BMO Nesbitt Burns in Toronto, say an outbreak could cut as much as 6 percentage points from growth in Canada and other countries, plunging the world economy into a recession. The U.S. Congressional Budget Office said in December a severe pandemic would cut 5 percentage points from U.S. growth in the year of an outbreak.

A milder pandemic, such as the 1957 Asian flu that killed 2 million people, would trim 0.40 percentage points from economic growth, Finance officials said in the document, prepared by the department's economic analysis and forecasting division. The Bank of Canada forecast in January the economy would grow 3.1 percent this year and 2.9 percent next year.

The disease is known to have infected at least 193 people in Asia, the Middle East and Africa since 2003, killing 109. The H5N1 strain has all prerequisites to spawn a pandemic except the ability to spread easily from person-to-person, the World Health Organization said last week. The last flu pandemic, in 1968, killed 1 million people worldwide, according to the Geneva-based agency.

Past Outbreaks

The internal briefing said past pandemics including the 1918 influenza that killed 50 million people and the Hong Kong flu of 1968 have shown the psychological impact of an outbreak is much smaller than most analysts assume.

``The premise that goods trade would be disrupted is not borne out by experience,'' they said. ``Advanced market economies are resilient to many natural shocks.''

Economic growth today is less vulnerable to a severe pandemic than in 1918 because of better production processes, flexible arrangements for workers, the increased importance of services, and ``automatic stabilizers'' such as the employment insurance program, the officials said.

The Finance Department analysts assumed that a severe pandemic like that of 1918 would make 6.2 million Canadians sick and kill 133,000 people.

Sectors such as the travel industry could be ``significantly affected,'' they said. The report focused on the economy, and didn't reflect a reduced quality of life from the illness.

Using the same mortality assumptions as the U.S., the analysts found a 1918-type pandemic would cut 2.4 percentage points off growth.

In their January briefing note, the Finance Department economists said the maximum drag on growth from a 1918-type pandemic would be 1.2 percentage points.

Understanding Avian Influenza