Pandemic: An Economist s View

Transcription

1 Pandemic: An Economist s View Dr. Sherry Cooper Global Economic Strategist & Executive Vice President January 31, 2006

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3 Pandemic: An Economist s View Dr. Sherry Cooper Global Economic Strategist & Executive VP, BMO Financial Group 160 Human Cases of Avian Flu Confirmed Deaths Outbreaks (as of Jan. 26, 2006), Human Cases & Deaths (May 1997 Jan. 30, 2006) Croatia Ukraine Russia Kazakhstan (Russia) Mongolia Romania Turkey 12 (4) Outbreaks of Highly Pathogenic Avian Influenza in Birds 1, Human Cases 1-99 (Deaths) Iraq? Sources: Financial Times, BMO Nesbitt Burns, OIE, WHO Thailand 22 (14) Cambodia 4 (4) China 10 (7) Laos Indonesia 19 (14) Vietnam 93 (42) South Korea Japan Hong Kong 20 (7) Malaysia SARS SARS in Canada... Some Hospitals at Surge Capacity Worldwide: Only 8,078 Cases 775 Deaths Toronto: 252 Cases 44 Deaths Very Mild by Pandemic Standards... Still Disruptive Canada: Hospital and School Closings 15,000 Quarantined WHO Warns Not to Travel to Toronto Tourism & Hospitality Business Crushed Bad Public Relations Page 1-4

4 SARS... Minor Impact Today s World: National Economic Boundaries Blur Real GDP (% chng) Hong Kong Quarter/ Quarter (a.r.) Year/ Year SARS -1-2 Quick Recovery Canada Quarter/ Quarter (a.r.) SARS Year/ Year Just-in-Time Management Globalization Multinational Corporations Global Travel Competition More Interconnected than Ever Before No Country is Self Sufficient Burgeoning Trade Exports + Imports (% of global GDP) Global Trade Free Trade Areas International Supply Chain Shortages Already 60 Record Markets Without Borders: What if Borders Close? Free Trade = ANDEAN+ASEAN+EU25+MERCOSUR+NAFTA intra agreement trade Sources: IMF, WTO Page 5-8

5 Large Companies Have Global Operations Globetrotters (mlns) Multinational Corporations: 70,000 Worldwide 690,000 Foreign Affiliates with almost US$19 trln in Sales International Travellers Asia & Pacific Americas Europe A Well-Travelled World Global Growth Strong World Travel and Tourism: 10% of Global GDP 8% of Global Jobs (ann % chng) Real GDP World Generated Over US$4 trln in Employs Over 200 mln People Source: WTTC 0 Ranked by 06 China India Asia Latin U.S. Canada Japan Europe (excl. China, America Japan & India) China the Global Growth Leader Page 9-12

6 GDP (% of global GDP) China: Second Largest Economy The Wealth of Nations GDP per Capita 2003 (US$ 000s : PPP-terms) Based on PPP Exchange Rates Source: IMF United States China Japan India Germany United Kingdom France Italy Brazil Russia Canada Today Big Jump! % of world below US$10,000 per capita Vietnam Cambodia Flu Areas are Poor India ($2,900) Indonesia Turkey China ($5,100) U.S. ($37,700) Canada ($31,500) Hong Kong South Korea ($20,100) Thailand Russia Rest of 6 7 Countries (width = population : blns) G-7 South Korea GDP per Capita ½ of U.S.... China ¼ of South Korea Gini Index The Very Poor are Dying of Bird Flu Commodity Boom Would Bust with Pandemic Brazil 59.3 Philippines 46.1 China 44.7 Hong Kong 43.4 Thailand 43.2 Singapore 42.5 U.S Cambodia Turkey Vietnam Italy U.K Indonesia 34.3 Canada 33.1 France 32.7 India 32.5 South Korea 31.6 Russia 31.0 Ukraine 29.0 Germany 28.3 Norway 25.8 Sweden 25.0 Japan 24.9 GINI INDEX... measures income inequality: zero represents perfect equality, 100 represents perfect inequality Source: Human Development Report 2005, United Nations Prices on Multi-Year Uptrend... Huge Boon to Canada China is Key Page 13-16

7 China China s Huge Demand for Resources (as of January 30, 2006) Commodities Surge Energy = Oil, Gas, Coal, Electricity China s Use of World s Supply: Cement Iron Ore Steel Aluminum Coal Paper Pulp Energy Oil 47% 30% 30% 21% 20% 14% 12% 12% 8% CRB Futures Index (1967=100) Gold (US$/oz) 25-Year High Record High Oil Prices (US$/bbl) Base Metals (US$000s/ton) Copper (lhs) Record High Record Highs Zinc (rhs) (January 1, 2005 = 100) For Better or Worse Canada Wealth At Risk... All Gains on Paper Toronto Stock Exchange Commodity Index Net Worth (% of personal disposable income) Long-Term Average (4.3x) Record x Household Assets ($ trlns outstanding) Homeowner Equity Life Insurance/ Pensions Stocks Bonds Commodity Index = CRB Futures Index Commodities Drive TSX (Household Assets Debt)/ Personal Disposable Income Homeowner Equity Dominates Page 17-20

8 Severe Pandemic Pandemic Unlike Other Natural Disasters Initial Panic Border Closings Absenteeism Months of Slowdown Economy Hit Hard Pervasive Prolonged Fear and Panic Communication Essential Unruly or Criminal Behaviour Inadequate First Responders Clear and Frequent Pandemic Action Plan Security and Safety To Offset Media Hype and Rumours Page 21-24

9 Supply Risks Prolonged Government Service Disruptions Possible Just-in-Time Management Travel and Transport Disruptions Shortages Loss of Labour Global Phenomenon... Nowhere to Hide Waste Management Clean Water Electricity Fuel Credit Card and Cash Machines Flow of News / Internet Continuity Planning Essential Some of the Big Immediate Losers Demand Effects Tourism Travel & Transport Hospitality Industry Life & Health Insurers Entertainment Industry A Run on Essentials: Prices Rise Shortages Reduced Demand: Social Distancing Business Shutdowns All Public and Private Gatherings Shut Down Fear and Panic Page 25-28

10 Medical Shortages Inadequate Death Management Ventilators Respirators Syringes Anti Bacterial Soap Antivirals Vaccines... Refrigerated Trucks Crematory Facilities Disrupted Funeral Services Virtually Everything Long-Term Psychological Trauma What if it s a Cytokine Storm à la 1918? 1918: Cytokine Storm Fatality Rates Highest for: Year Olds Pregnant Women Lose Most Productive People Birth Rates Plunge Average Age Rises Effects are Lasting Canada s Population Growth Already Slowing Page 29-32

11 Profound Demographic Implications Long-Lasting Effects Fertility Rates (number of children per woman) Births Parents (61-81) Baby Boom (42-60) Canada (000s : rhs) U.S. (mlns : lhs) Baby Bust (30-41) Echo Boom (0-29) Traditionalists Boomers Gen X Gen Y Gen Z Year of Birth G-7 U.S. France U.K. Canada Germany Japan Italy Asia India North Korea China Other Israel Birth Rates Already Low Canada ( ) = youngest/oldest age in 2006 Source: Statistics Canada Business Continuity Planning Business Continuity Planning 30% Reduction in Workforce Cross-Training / Redundant Labour Telecommuting Security and Safety Protect Core Business Activity Healthy Work Environment Minimize Customer Contact Non-Punitive Sick Leave and Family Leave Policies Mandatory Absence of Sick Page 33-36

12 Economic Impact of a Flu Pandemic Global Economy Survives (US$ blns : 2005:Q3) Mild Pandemic Severe Pandemic Growth Effect (percentage points) -2 ppts -6 ppts Global Economy 1.1 trln 3.2 trln U.S Eurozone Japan U.K Canada Other Advanced Economies China India Africa Other Emerging Economies Business and Governments Learn Lessons More than 98% of Population Survives Borders Open Trade Re-Commences Page 37-40