5 Ways the Ebola Outbreak Could Hurt the Economy — And Your Wallet

By Brittany Lyte on 24 October 2014 0 comments

We all know that the Ebola virus probably is not a threat to our health — but what about our fiscal health? As this deadly global story comes to a boil, it's also taking its toll on our wallets. And while nothing could compare to the deadly effects of the disease, these financial concerns are worth keeping an eye on.

1. There Could Be a Global Financial Collapse

Analysts at Barclays are warning that the continued spread of the deadly Ebola virus beyond the confines of West Africa could have a "significant" impact on the financial markets. "Ebola's likelihood of spreading to larger, more integrated economies has increased," Barclays' Marvin Barth told The Telegraph.

Already the disease has sparked a sell-off of travel and airline stocks worldwide. "If consumers and businesses retrench by reducing flights on airplanes, changing vacation plans, or altering business connections in a globally interdependent world, G.D.P. growth rates will fall farther," wrote David R. Kotok, chairman and chief investment officer of Cumberland Advisors. "We do not know how much, at what speed, or for how long."

In terms of its potential to wreak havoc on the markets, experts are comparing Ebola to Asia's outbreak of the airborne SARS virus in 2003. Not only did SARS rattle regional tourism and China's stock exchange, it also instigated a pronounced slump in retail sales.

2. The Price of Chocolate Could Skyrocket

Hold on to your chocolate bars! The price of cocoa beans spiked more than 10% last month due to fears that Ebola could spread to the Ivory Coast, the world's largest producer of chocolate's main ingredient. Ivory Coast shares a border with Guinea and Liberia, two of the three countries (the third being Sierra Leone) that are most affected by the virus. Not only is this West African region ground zero for Ebola, but it's also home of 70% of the world's cocoa supply. With Halloween just around the corner and the holiday season soon to follow, Nestle's chief executive has said the company is on "high alert."

3. Airline Stocks Could Take a Plunge

Airline stocks are already down about 7% due to fears of a global health crisis. And on the heels of news earlier this month that a medical worker contracted Ebola in Spain, shares in IAG, which owns British Airways and Iberia, as well as the cruise operator Carnival, dropped nearly 9% in two days, largely due to concerns about the potential for future travel bans. Meanwhile, the World Travel and Tourism Council that represents airlines, hotels, and other travel companies is reporting a 30% plunge in early bookings to Africa, where the disease is deeply entrenched. But experts say the outlook for airline companies and their shareholders could likely get much, much worse.

"It certainly depends on how serious and how widespread the situation becomes," Michelle Girard, chief economist at RBS, told a reporter for Yahoo! Finance. "Of course, people talk about, 'What if it becomes airborne?' And then you have a scenario where the borders are shut and people are afraid to travel, not just internationally, but perhaps domestically. If there are concerns about… being trapped on an airplane with the potential for somebody to be spreading the virus. Those are all the things that people are worried about, and you can understand that forward-looking investors are beginning to at least price in. [They] feel the need to price in some probability or some sort of risk of that [happening], albeit small."

4. Travel Insurance Could Become a Must

Global health and safety events are among the top reasons why nearly half of all jetsetting Americans consider purchasing travel insurance for international trips, according to data from Allianz Global Assistance USA. After Sept. 11, for example, there was a 10% bump in spending by Americans on airline travel insurance. But right now only about a third of Americans flying to foreign destinations actually follow through and buy the insurance. Experts say that's likely to change. As the Ebola virus continues on its cross-continental course, infecting numerous persons who either caught the virus or transported it via airplane, it's likely that more Americans will begin to view spending on airline travel insurance as a necessity.

5. The Health Care System Could Be Taken for a Ride

Nobody has yet to calculate the fallout of the Ebola virus on the health care system — neither here in North America nor abroad. But what's clear is that the money being poured into the fight against the disease (training, testing, treatment, waste disposal) — not to mention the money lost as hospital beds sit unused in isolation areas — will certainly affect the industry.

"One of the things I fear about Ebola is that it could spread more widely in Africa," Center for Disease Control Director Dr. Thomas Frieden told a congressional hearing. "If this were to happen, it could become a threat to our health system and the healthcare we give for a long time to come."

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