A bird flu pandemic is likely to deal a sharp blow to the global economy with widespread disruptions in work places, trade and payment systems and could prompt a surge in demand for cash, the International Monetary Fund has warned.
"If the pandemic is severe, the economic impact is likely to be significant, though predictions are subject to a high degree of uncertainty," the IMF said in an initial assessment of risks associated with a bird flu pandemic if it were to spread from person to person. Currently, bird flu has been proven to spread only from birds to humans.
"Once the pandemic has run its course, economic activity should recover relatively quickly," the global lender said.
The H5N1 strain of the deadly bird flu virus has spread into Europe, Africa and resurfaced in Asia.
The World Health Organization has confirmed that 176 people have been infected with bird flu around the world since 2003, and 98 have died, and Azerbaijan said on Monday that three people have died there of bird flu. So far, the virus remains in birds, but experts fear it could change into a form easily transmitted from person to person and sweep the world, killing millions.
The IMF said its assessment was aimed at helping its 184 member countries prepare for a possible pandemic.
The IMF said the biggest disruption would come from high absenteeism levels in the work place, as people stayed home to deal with infections or to avoid them.
It also warned that trade, transportation and tourism would be affected as countries restricted exports to control the spread of the virus.
The fund said net capital flows to emerging markets may be temporarily reduced and some governments may be forced to draw on their reserves to ease pressure on their budgets.
It said capital flows would be affected "as a result of some combination of possible operational disruptions in the financial systems, loss of confidence in more vulnerable countries, and abrupt shifts in risk preferences."
Commodity prices could also decline mainly due to weaker demand, the fund said, also cautioning there could be supply disruptions for key commodities such as oil.
"Although these effects are likely to be temporary, asset price declines could put the balance sheets of some financial institutions under stress and they may face challenges in meeting regulatory norms," the IMF said.
"Market operations could become more disorderly in the case of a breakdown in the trading infrastructure, leading to limited or intermittent trading," it added.
The fund said increased spending by governments on health and public safety would likely put pressure on fiscal balances and monetary policy may need to be eased temporarily.
"In response, allowing a temporary easing in the fiscal stance would be appropriate in most cases," it said, adding that central banks should ensure they have enough cash to deal with a possible surge in liquidity demand and "shock-related" price increases.
Sandy Mackenzie, assistant director in the IMF's research department, said in a conference call with reporters it was difficult to forecast the impact of a bird flu pandemic on global gross domestic product. Still, he said stable countries could encounter a sharp but short-lived impact on GDP from a severe pandemic.
"GDP might drop very sharply in one quarter and then rebound the next," he said. "The sharp decline would be due to the fact that rates of absenteeism and illness between them would reduce the labor force and labor time substantially."
Asked if there had been any impact to the global economy since the 2003 bird flu outbreak, Mackenzie said the biggest impact was to the poultry industry of certain countries amid mass culling of birds.
"The impact is not great enough as yet to register on GDP," he said, adding that governments and businesses were not all prepared to deal with a possible pandemic, especially in the world's poorest countries.