Pandemics and outbreaks, such as South Korea's present struggle with Middle East Respiratory Syndrome (MERS), are horrifying things. But in the past – though this may seem trivial in the face of death and illness – they have often been exacerbated by economic hardship. Trips cancelled, businesses shutting down and groups nixing big conferences have all taken a toll. One estimate pegged the total cost of the global outbreak of Severe Acute Respiratory Syndrome (SARS) at $40-billion (U.S.).
That's what makes Seoul's overt attempts to stave off the economic hit of MERS so interesting. MERS has already killed 23 people in South Korea, and thousands remain quarantined, but the country's leaders have made a point of stressing potential economic fallout – and urged businesses and others to counteract it.
"I ask the business community," President Park Geun-hye said recently, "to continue to go on with investment, production and management activities as normal and particularly help with ensuring that consumers don't hold back from spending money."
Will it work? They've already gone much further than words. As the MERS crisis continued, the country's central bank cut interest rates to record lows – a move, though expected, that many interpreted as a means to boost economic growth amid the negative impact of the outbreak. The authorities have shut thousands of schools, and one zoo south of Seoul even isolated its camels (the animals are believed to be a source of the disease).
But it will still not be enough to counter the negative economic impact. The Ministry of Culture, Sports and Tourism said more than 100,000 people have already cancelled trips, and estimated that the country could lose $900-million in revenue. Tourist visits are down 20 per cent in the past month. The government is contemplating loans to struggling travel agencies and hotels, and has said it will offer insurance to foreign visitors as an incentive, in case they get sick and have to be hospitalized. One economist suggested many Koreans will turn to online shopping at big companies, rather than go outside to shop in the streets, which would further hurt smaller businesses – a sector of the South Korean economy that is already hurting, and necessary for broad-based growth beyond the conglomerates.
South Korea, with which Canada has struck a free trade agreement, has evolved from a poor, war-torn country to an exporting powerhouse in less than a generation. But South Korea, like Japan, is now pushing up against the limits of export-led growth, and its weak economy, with tumbling exports, is at risk. There is little room for error as the increasingly unpopular Ms. Park tries to fight the latest crisis after her much-criticized handling of the sunken Sewol ferry tragedy last year.
The comprehensive economic fallout will take some time to calculate, and will depend on how South Korea is seen handling the crisis. Early stumbles did not help. When the first case of MERS was diagnosed, one man under voluntary quarantine flew to Hong Kong, and then went to China. Others soon violated the quarantine. With SARS, South Korea was able to observe other countries go through the crisis first, and contained the problem quickly. This time is different, and analysts view it as one more example of Ms. Park's incompetent handling of a crisis – which could compound things as she tries to prevent economic damage.
"She doesn't have much credibility," says John Delury, an associate professor at Seoul's Yonsei University. "So when she says, 'Everything is fine. Get back to work,' no one pays attention."
Luckily for South Korea, and other developed economies, the post-SARS world seems more reticent to impose travel bans and advisories, at least for some countries, says Allison McGeer, the director of infection control at Toronto's Mount Sinai Hospital. One of those advisories hit Toronto during the SARS crisis, and helped cost the local economy an estimated $1.5-billion. "I think really big economic losses are due to other countries' perception of how you are handling it," Dr. McGeer said.
Dr. McGeer notes, of course, that for poorer countries the economic impact of an outbreak is even more debilitating: HIV/AIDS has devastated entire labour forces, and Ebola, hitting fragile health systems, killed many front-line health workers and discouraged people from seeking medical attention for other serious ailments.
Unluckily for Liberia, Sierra Leone and Guinea, the world has not been as generous as it has with South Korea – including Canada's much-criticized ban on visas to people from Ebola-affected countries. The trio of West African states remain stigmatized by warning signs in many international airports, long after their Ebola crises have wound down. Although Seoul may be better off than it would have been a decade ago – one consultant there told me he has seen a few clients defer meetings, but little else – the global playing field is still far from fair in terms of how the economic damage of outbreaks is spread.