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Swine Flu Yet Another Threat To Wobbly Global Economy

Pedestrians look at a share prices board in Tokyo on April 28 after share prices fell amid fears over the swine-flu outbreak.
Pedestrians look at a share prices board in Tokyo on April 28 after share prices fell amid fears over the swine-flu outbreak.
(RFE/RL) -- Swine flu appears to be spreading, with new cases reported in a growing number of countries.

It's causing a different type of contagion, too -- in the financial markets. The outbreak comes at a perilous time for a global economy already battered by the financial crisis.

Stock markets around the world have dropped on concern about the outbreak's impact on the global economy, though the effects, as New York trader Doreen Mogavero notes, are uneven.

"The airlines have been hit pretty hard in anticipation of the fact that people will fly less if they're afraid that they may be able to catch something in the air of an airplane," Mogavero says. "The drug sector has been doing a little bit better in anticipation obviously of being called upon to take care of people if they should fall sick, or to be able to develop new drugs in order to combat the flu."

Confirmed cases of swine flu in humans have been found in just a handful of countries so far -- including the United States, Britain, and Spain. So far, at least, the disease has been deadly only in Mexico.

'If It Grows, Evolves'

Keith Hansen, a health official at the World Bank, says it has had limited impact -- so far.

"The economic impact will depend entirely on the scope, the nature, and the duration of an epidemic, if it grows and it evolves," he says.

Specifically, the concern is that the outbreak could evolve into a pandemic, a disease spreading from person to person across borders.

Last year, the World Bank estimated a flu pandemic could cost the global economy $3 trillion and cause output to fall by some 5 percent.

The World Health Organization (WHO), which is monitoring the outbreak, says a pandemic is not inevitable.

Arriving passengers pass by a thermal camera at Incheon International Airport in Seoul, South Korea, as authorities step up quarantine measures.
Still, the economic effects of the outbreak are already visible.

Several countries, including Japan and China, have tightened border controls, screening visitors coming from North America, and in Japan's case at least, denying visitors from Mexico the chance to get a visa on arrival.

Hence the impact on airline, travel, and tourism stocks.

That's also one of the reasons oil prices fell, to below $49 on April 28.

And the prices of other commodities like soy and corn have also fallen in anticipation of a drop in demand for animal feed and pork.

Meanwhile, the dollar has risen -- the euro fell to $1.30 from $1.325 on April 27 -- as investors flock to the perceived safety of the U.S. currency.

And several countries have taken protectionist measures.

China, Russia, and Indonesia are among those banning imports of pork from Mexico and parts of the United States, despite health officials' assurances that people cannot get the flu by eating pork or pork products that are cooked properly.

This all comes at a perilous time for a world economy that is expected to contract this year for the first time since World War II.

Experts warn it could exacerbate the recession and stall a recovery.

'Heaven Help Us'

In recession-hit Britain, influential economist Roger Bootle told a Parliamentary committee on April; 27 that the country's soaring debt eroded its ability to cope with a potential flu epidemic.

"If there were to be an enormous burden on the public finances from that source [war] or [perhaps] from, God forbid, some ghastly pandemic of the sort that's in the news at the moment -- heaven help us how we would cope," he said.

While U.S. officials continue to stress difficult times ahead, some, including President Barack Obama, had begun to talk tentatively of "glimmers of hope" in the economy.

White House spokesman Robert Gibbs said the administration is keeping a close eye on the potential fallout.

"I think it is a little early to determine the economic impact," Gibbs said. "But obviously NEC [National Economic Council], CEA [Council of Economic Advisers], and Treasury are monitoring that situation and looking into it."

Swine flu is also influencing the kinds of things those involved in the financial markets are watching.

Chief among them-- further pronouncements from the WHO on its alert level for swine flu.

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