The economic consequences of the H1N1 virus escalating to pandemic levels could be severe, says HIS Global Insight.

“In a mild epidemic, the impact on growth would be limited. But in a more severe epidemic, the consequences could be quite dire,” notes IHS chief economist, Nariman Behravesh, in a research note.

It says that in the case of a mild epidemic — roughly 75 million infected in the United States and 100,000 fatalities — the supply and demand effects that would likely result could cut less than 0.5 percentage point off of the GDP growth rate, and these effects would last less than a year. Although, the impact in emerging markets would be likely to be two to three times as big, it adds.

“In a more serious epidemic — or pandemic — with fatalities four to five times higher, the impact on real GDP growth in developed economies would be more like minus 2-3 percentage points. In the case of the United States, this could mean a growth rate of minus 4-5% in 2009 and an even bigger rise in the unemployment rate. For poorer countries, which are less able to cope with such an outbreak, the impact would be devastating, and produce downturns of depression-like proportions,” it warns.

The note cautions that it is too early to say whether a full-blown pandemic will materialize, “but for decades health experts have been warning it is a question of when, not whether, this will occur.”

“The worst-case scenarios would take a weighty toll on the world economy, falling heaviest on developing countries that lack adequate medical and emergency infrastructure, but also affecting advanced economies on both the supply and demand sides of the equation,” it says.

IE