The H1N1 virus is a type of swine flu, which a respiratory disease of pigs caused by the type A influenza virus. In 2009 the pandemic reportedly may have killed as many as 575,000 people, though only 18,500 deaths were confirmed.
As the epidemic gathered force, officials in some countries considered closing schools in order to reduce transmission of the virus. Later on economists at the Brookings Institution analyzed the direct economic impact of closing schools during a flu pandemic in a study, which said that closing all K-12 schools in the U.S. for two weeks would result in between $5.2 billion and $23.6 billion in lost economic activity, while a four-week closing would cost up to $47.1 billion dollars, which is 0.3 percent of GDP. Yet another study by the U.K. economists modeling the global economic fallout from a hypothetical influenza pandemic predicted only a 0.5% GDP loss from the base effect of the disease itself but up to 8% due to policies intended to mitigate its spread, such as school closures.
Kendrick White, managing partner at Marchmont Capital Partners, told us how important the fear factor is in case of a pandemic.
“Everything depends on how quickly a government or authorities in a local region react to some sort of problem like that. If there’s a slow reaction, if there’s a growing epidemic, if people start to see the news of some epidemic day after day then they begin to get afraid. And it also comes down to investor confidence – if investors feel scared, unconfident and uncomfortable with the reaction they simply hold off their investment plans,” Kendrick White said.
Nevertheless, back in 2009, Kendrick says, the authorities managed to tackle the fear factor and avoid panic and economic losses.
“I think the markets pretty quickly recovered because there was a consorted effort to contain the problem on the part of authorities, and I think the long-term economic effect was not so great,” Kendrick White said.
Some market players even managed to profit from it – thus, sales of vaccines and drugs to combat the virus in 2009 boosted some pharmaceutical companies, but this is yet another story.