Economic impact of Ebola IHS Senior Sub-Saharan Africa Economist Ama Egyaba Baidu-Forson looks at the economic impact of Ebola in West Africa. Key points

The negative economic impacts are still being assessed by IHS, but overall we expect them

to be broad-based across all economic sectors in the three countries, and are revising down

our near-term GDP growth forecasts for Guinea, Liberia, and Sierra Leone as a result.

Adding to the weaker near-term economic prospects is the risk of surging domestic prices in

urban areas, as is currently the case in Liberia where the government's efforts to regulate

the prices of soap and bleach (amongst other sanitation goods) have forced up prices for

other basic commodities.

There is a real risk that the governments of all three countries will have to contend with

larger-than-expected budget deficits this year as they try to effectively address the disease

outbreak. This coupled with elevated pressures on balance-of-payments positions as export

revenues, foreign-exchange earnings, and capital inflows shrink, could eventually give way

to a heavier dependence on external financial assistance, with additional recourse to the

International Monetary Fund for exceptional financial support.

Analysis:

The ongoing outbreak in West Africa is the worst the continent has ever seen. The emergency

funds pledged by the World Bank and the AfDB in direct response to the WHO's financial

commitment and joint response plan underscore both the severity of the current situation and

the critical need for highly collaborative efforts on all fronts – national, regional, and global – to

successfully curb the disease.

Broad economic impacts across agriculture, mining, minerals, service sectors

The negative economic impacts are still being assessed by IHS, but overall we expect them to

be broad-based across all economic sectors in the three countries, and are revising down our

near-term GDP growth forecasts for Guinea, Liberia, and Sierra Leone as a result. In locales

where the Ebola virus is already present or in close proximity, the risk of further contagion is

high given ill-equipped health facilities and the complexities of social norms, including traditional

burial customs.

Rural communities in these areas are especially at risk, and as a result we expect primary

sector activities, particularly in agriculture, to slow down further as growing fears curb people's

interactions within farming areas and movement between settlements. This view is

substantiated by local reports in all three countries of farm workers leaving affected areas.

Pockets of food insecurity could rise over the near term, alongside higher domestic food prices

should food stocks drop substantially.

A slowdown in mining sub-sector output and exports (particularly iron ore in Liberia, and

diamonds, rutile, and iron ore in Sierra Leone) as a result of scaled-back operations and the

evacuation of some expatriate personnel poses the greatest downside risk to secondary sector

contributions to overall growth. The drag on services sector activities will worsen further in light

of reduced local commerce and cross-border trade, as well as significantly curbed domestic

transport and international travel.

Price surges

Adding to the weaker near-term economic prospects is the risk of surging domestic prices in

urban areas, as is currently the case in Liberia where the government's efforts to regulate the

prices of soap and bleach (amongst other sanitation goods) have forced up prices for other

basic commodities. Secondary inflationary impacts have also emerged in the transport sub-

sector, where transporters have raised passenger fares in response to smaller passenger loads

in order to cover fuel costs.

Fiscal implications of the outbreak

The fiscal implications of the outbreak will take several forms, including: an increased strain on

government resources as budgets are recalibrated to allow for higher health-related

expenditures (and additional security-related spending in the cases of Liberia and Sierra

Leone); lower domestic revenues from weaker economic activity (particularly from foregone

trade tax revenues); and suspended disbursement of funds as donor-driven projects and

programmes are either significantly downsized or put on hold.

There is a real risk that the governments of all three countries will have to contend with larger-

than-expected budget deficits this year as they try to effectively address the disease outbreak.

This coupled with elevated pressures on balance-of-payments positions as export revenues,

foreign-exchange earnings, and capital inflows shrink, could eventually give way to a heavier

dependence on external financial assistance, with additional recourse to the International

Monetary Fund for exceptional financial support.

Danny Cheung Asia Pacific Director Corporate Communications

8 Marina View #12-01 | Asia Square Tower 1 | Singapore Phone: +65 6439 6192 | Mobile: +65 9171 3200 Danny.Cheung@ihs.com

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