GDP could shrink an additional 3% in 2009 due to swine flu, warns a prominent think tank.
LONDON -- Just as the British economy was slowly beginning to recover, a new foe has emerged. Swine flu could cause Britain's economy to shrink by a gigantic 7.5% this year and dash hopes of recovery next year.
"If the worst-case scenarios of the threat of swine flu are fully realized, gross domestic product could fall by as much as an additional 3% this year and another 1.7% in 2010,” said Peter Spencer, chief economic advisor to the Ernst & Young Item Club, a London-based think tank.
“Our recovery will really only begin when world trade starts to recover, and we should see output beginning to grow next year just as long as the U.K. economy doesn’t catch a severe case of H1N1," he added.
The worst-case scenario means a 50% infection rate. In this case, swine flu could leave businesses without employees, consumers spending less on goods, and transport and tourism impacted as people stay away from public places to avoid infection, according to Hetal Mehta, senior economic advisor to the Ernst & Young Item Club.