Via his excellent blog Peak Jobs, Shane Granger writes: US: Implications for employment and growth as MERS is found in America. Excerpt:
Although MERS lacks the ease of transmission of SARS its high media exposure and continuing global spread have both health and economic implications. This has been fuelled by a lack of transparency by the KSA Ministry of Health (a failure that cost the Minister his job recently).
I won’t comment on the health implications but with planes of people being tracked and isolated because of infected patients globally and most recently in the United States the short-term economic impacts with knock on effects to consumption and employment could be felt very shortly.
In the short term, flu-like diseases such as MERS impacts economic growth by reducing demand:
1. Consumer confidence decreases, (in the case of SARS quite dramatically) in impacted countries, leading to a reduction in private consumption spending. Much of the impact stems from the great uncertainty and fear generated by the disease. People prefer to stay at home (social distancing) to reduce the probability of infection.
2. Service exports, in particular tourism but sometimes other sectors (such as education) are almost immediately impacted.
3. Transport hubs in the impacted area are also impacted as people either cancel travel or take alternate routes. The Middle East in an important transport hub (as noted by Crawford Kilian on the 19th April).
4. Investment is affected by reduced overall demand, heightened uncertainties, and increased risks. Excess capacity will emerge or increase. 5. Foreign investment inflow may be delayed or reduced in reaction to a disease outbreak.
6. While increased government spending will mitigate the impact, the ability of governments to revive economies facing widespread reductions in private spending is limited.