Swine Flu: Just Waiting To Cripple Economies

As if there wasn’t enough to worry about, we now have Ernst & Young warning that Britain could end up in a long deflationary slide because of the swine flu. Do you get the feeling that we’re living through some sort of Old Testament era?

From the Telegraph:

The group [Ernst & Young] said a pandemic reaching 100,00 cases a day by August, and lasting six months, would lead to a 7.5pc fall in GDP this year. The lingering damage would cause a further fall of 1.2pc next year.

“With the western world still teetering on the brink of deflation it is not an exaggeration to say that a pandemic on this scale could tip it over the edge,” it said.

The figures are based on projections made by Sir Liam Donaldson, the Government’s chief medical officer. The report assumes that infections will ultimately reach 50pc, with a mortality rate of 0.4pc. Most of spread will occur before a vaccine is ready. “Sir Liam is an expert on pandemics. We think his advice should be taken very seriously,” said the report.

“The main effect on the supply side will be that sick employees cannot go to work. On the demand side, spending on discretionary goods and services such as restaurants or tourism is likely to fall as people stay away from public places to avoid infection. Uncertainty about these developments is likely to make businesses further postpone investment projects,” it said.

The warning comes as the World Health Organisation confirmed fears that the H1N1 virus is moving with “unprecedented speed” as modern travel carries the virus, spreading further in six weeks than earlier pandemics in six months.

The Ernst & Young report works from the assumption that virus remains mild with a low death toll, but H1N1 is mutating all the time and the WHO is concerned that it could turn more deadly at any moment – especially if it recombines with H5N1 avian flu in South East Asian hotspots or Egypt.

Some experts say those countries such as the US and Britain that are taking the brunt of the pandemic early may prove lucky, since they will enjoy a broad-based immunity should the virus strike back with more lethal effect in a second phase as occurred in the 1918-1919 pandemic.

The word on the street is that Matt Taibbi has tied the disease to Goldman and will document it in an upcoming Rolling Stone feature.

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