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Flu Economics

It remains to be seen which will have the worst effect--swine flu itself, or the economic shockwaves it is creating. Following the flu's outbreak, the World Health Organization (WHO) raised its pandemic alert level twice in a single week and cases were confirmed in new countries nearly every day. Mexico City, the outbreak's early epicenter, quickly transformed into what Newsweek called a "city of fear." The combined effect was media alarm--what one expert called an "infodemic" (FP). And the economic repercussions were immediate. The Mexican peso cratered (Dow Jones), travel advisories derailed tourism (Bloomberg) (with knock-on effects for airlines), and some trading partners moved to block certain Mexican exports. Officials in Mexico City have already lowered their estimates (Reuters) for economic growth, and some analysts speculate Mexico will have to tap its $47 billion credit line with the International Monetary Fund.

From an economic perspective, Mexico's troubles could be just the beginning. Experts say the ultimate cost of the H1N1 virus will stretch beyond the costs of containing the disease and treating those infected.Over ten countries outside Mexico, including the United States, have confirmed cases of the virus, in some cases prompting travel and export restrictions akin to those faced by Mexico. That number is expected to grow as the disease spreads. CFR's Laurie Garrett noted in a recent conference call that the virus's spread and the WHO's heightened alert level will require more stringent public health measures worldwide, all of which come at an expense. These costs are a particularly bitter pill for developing countries that have more significant financial restraints and that, in many cases, have already seen their economies shaken down during the present economic crisis.

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