The swine flu outbreak should not have any meaningful impact on the economy, and even a worse-than-expected pandemic would only have a small economic effect, suggests TD Economics.

In a report published Thursday about the possible impact of the H1N1 virus, TD notes that, “While the impact on human lives should not be understated, at the current stage it remains unlikely that the disease will reach a large enough scale to have a noticeable effect on aggregate economic activity.”

In that unlikely case of a more severe outbreak, the report says that the economic effect would still be relatively mild. It points to increased employee absenteeism, which could have a temporary negative impact on hours worked, and therefore on economic activity. Also, it says that demand within certain industries such as tourism, airlines, and arts and recreation would likely be negatively impacted.

“Should the spread of the disease prove worse than currently expected, an influenza pandemic similar to those of 1957 and 1968 would also likely prove to have a relatively mild effect on overall economic activity. The total economic impact of this type of pandemic could be a negative shock to annual real GDP growth of between 0.4 and 0.8 percentage points,” it says.

“And while the prospects for a more severe outbreak of the disease are in our view extremely low, a scenario closer to the experience of 1918, could be expected to have a larger impact on GDP, somewhere in the range of 1.3 to 2.8%,” it concludes.

IE