Pandemics not only have health effects, but also social and economic ones. They affect the economy, social coexistence and the fundamental trust in national institutions. Under certain circumstances, this can also lead to the destabilization of individual countries or entire regions as we have learned from past experiences.

Lessons from Ebola and SARS

In the Ebola epidemic, the already weak health care system in the affected countries collapsed due to the high burden of disease. The closure of schools, public places and markets, as well as the fear and panic of infection brought public life to a standstill. The fact that farmers in particular were also affected by the disease led to a shortage of food and a sharp rise in food prices. Due to the loss of workers and the panic fear of the disease, economic productivity and trade collapsed. The most affected countries became increasingly isolated internationally through border closures and the cessation of travel and trade.

The spread of SARS in 2002/2003 also had a strong economic impact on trade, business and travel, particularly in Canada and Singapore. In Canada, the real gross domestic product (GDP) in 2003 was expected to be about $1.5 billion or 0.15% lower. The greatest impact of SARS was in the tourism sector, where a national loss of $1.1 billion was expected in Canada in 2003.

Three main reasons for the socio-economic consequences of SARS have been identified. Firstly, fear of infection has led to a decline in consumer demand, particularly in the travel and retail sectors. The rapid spread meant that people avoided social interactions in affected regions. These negative effects were more prevalent in regions with large service-related activities and population density, such as Hong Kong or Beijing. Secondly, the uncertainty associated with the disease led to a loss of confidence in the future of the affected economies. The loss of confidence of foreign investors had a strong impact on foreign investment flows, which caused losses in economic growth. Thirdly, SARS has led to an increase in disease prevention cost that has exceeded all expectations.

What we already know about the economic consequences of COVID-19

It is not yet clear how strong the impact of the current corona pandemic will be on the global economy. Although the crisis situation is far from over, it already has a strong impact on the socio-economic system. In Germany, for example, the DAX-Ax lost 39% of its value between February 19 and March 19. A further slump in share prices could only be stopped after the German government set up a historically unique rescue fund of around 500 billion euros. A recession is nevertheless inevitable and the current recovery of the stock markets remains fragile. DZ-Bank expects that the stock market barometer will only return to pre-crisis levels at the beginning of 2024.

Globally, the International Monetary Fund (IMF) expects the economic output to shrink by 3%, causing the worst global recession in almost a hundred years. In general, the GDP forecasts for 2020 depend on the ability to curb the COVID pandemic and the speed of economic recovery in the second quarter of 2020. Therefore, current economic prognoses still contain “extreme uncertainties”, so the IMF.