How COVID and Other Pandemics Affect the Economy

Effects Linger Long After the Fever Passes

Mother and son wearing masks

 Photo by Halfpoint Images/Getty Images

The global cost of infectious diseases like the COVID-19 coronavirus pandemic is rising as the world becomes more financially integrated. Outbreaks spread faster thanks to urbanization, mass migration, and international trade. They disrupt the economy and basic social functions like schools, health care, and employment. Global trade means the supply of goods from affected areas could be threatened. Investors expect greater returns on new investments the longer an outbreak lasts to compensate for higher risks. 

Key Facts

  • Coronaviruses cause everything from the common cold to SARS, as well as the 1918 Spanish flu.
  • The 2020 coronavirus outbreak could shrink the global economy by $2 trillion.
  • Pandemics and public health emergencies have a consistent track record of negatively affecting local economies.


Coronaviruses cause illnesses ranging from the common cold to dangerous diseases such as Severe Acute Respiratory Syndrome (SARS). Symptoms include fever, cough, shortness of breath, and breathing difficulties. These can lead to pneumonia, kidney failure, and even death.

There are no vaccines for new coronaviruses and it can take years to develop one. As a result, only the symptoms can be treated. A new coronavirus outbreak can overwhelm health care systems.

2019 - 2020 Coronavirus COVID-19 Outbreak

On March 11, 2020, the World Health Organization declared the new coronavirus a pandemic. It follows the WHO's Jan. 30, 2020, declaration of the disease as a public health emergency. That was based on 7,711 confirmed and 12,167 suspected cases in China at the time.

As of August 25, 2020, there were 23.7 million cases and 815,029 fatalities from the COVID-19 coronavirus worldwide. More than 15 million had recovered. The United States has the most number of cases at more than 5. 7million.

COVID-19's estimated mortality rate is worse than the flu's 0.1% rate. It is less deadly than SARS’s rate of 10% but spreads more quickly. One reason is that the incubation period is longer—up to 14 days. Many people don't show symptoms. As a result, people spread the disease before they even realize they are sick.

COVID Economic Impact

The economic impact was immediate. Hong Kong’s Hang Seng Index immediately plummeted 9% from its Jan. 16 peak. On March 9, 2020, the price of Brent oil fell to $20.09 a barrel, a 71% drop from its Jan. 6 peak of $70.25.

As the disease spreads worldwide, it constrains supply and lowered demand. Travel and entertainment industries were the hardest-hit at first as people stayed home. Airlines could lose up to $113 billion, while the film industry could lose $5 billion.

The virus could cost the global economy as much as $2 trillion for 2020. It could reduce global growth rates to 0.5%.

Panicked investors created the 2020 stock market crash. It sent the Dow Jones Industrial Average down a record 2,013.76 points on March 9, 2020. On Wed. March 11, the Dow closed at 23,553.22, down 20.3% from the Feb. 12 high of 29,551.42. That ended the 11-year bull market begun on March 5, 2009.

A record 3.3 million Americans filed for unemployment insurance the week ending March 21, 2020. The Federal Reserve estimated that the second-quarter U.S. unemployment rate could be 32.1%. Large numbers of workers in the sales, manufacturing, and food services industries are being laid off as demand plummets.

The outbreak has already had a devastating effect on China’s economy, the first country hit. Auto sales dropped by 80%. China's exports fell by 17.2% in January and February. Rabobank estimated a 1%-2% impact on China’s gross domestic product in the short term. The outbreak occurred in the Hubei province, which accounts for 4% of China’s GDP. Wuhan, the capital, is a transportation hub and China’s second-largest auto manufacturer. It also coincided with the Chinese New Year, a strong period for retail sales.

On March 27, 2020, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The $2 trillion aid package provided financial aid to families and businesses impacted by the coronavirus. 


Severe Acute Respiratory Syndrome (SARS) is a coronavirus that includes a fever and a dry cough that often leads to pneumonia for most patients. 

The SARS outbreak only lasted six months, between February 2003 and July 2003. At the same time, the high mortality rate created great fear of contracting the disease. In affected areas, travel and retail sales plummeted, and the lost economic activity was between $40 billion and $80 billion. 

Spanish Flu of 1918

One reason this influenza was so lethal was that it attacked before the invention of sulpha drugs and penicillin antibiotics. It was dubbed the "Spanish flu" since Spain had one of the most publicized early outbreaks. Almost 8 million Spaniards were infected by early 1918.

The movement of World War I troops helped spread the Spanish flu. 

The pandemic lasted from the spring of 1918 through the spring of 1919. Worldwide, one out of three (or 500 million people) got sick. Of those, 50 million died, some within hours, and the world population at the time was less than 2 billion. In the United States, 675,000 died.

Ironically, many U.S. communities experienced higher wage growth following the pandemic. The high mortality rates reduced the number of healthy workers. As a result, employers paid higher wages to attract the workers who were left. 

Long-term, the Spanish flu affected children whose mothers contracted it while they were pregnant. These children were 15% less likely to attain high school degrees. The men’s wages were 5% to 9% lower as a result. 

The Plague

The bubonic plague killed 40% of Europe’s population between 1347 and 1352.  England, France, Italy, and Spain lost 50%-60% of their populations in just one to two years. People did not know what caused it, so they didn’t flee infected areas. As a result, it killed rich and poor alike. 

The economic impact was severe. It took 200 years for cities to regain their pre-plague populations. Cities created tax exemptions, free housing, and other perks to attract migrants. Urban incomes went up and, in many rural areas, the land returned to forests. The lack of rural farmers meant serfdom went into a sharp decline from 2 million in Western Europe in 1400 to just a few thousand by 1500.

Ebola 2014 Epidemic

The 2014 Ebola epidemic infected 28,639 people and killed 11,316 in West Africa. It led to an additional 10,600 deaths from untreated conditions as doctors focused on stopping the outbreak. Around the world, more than $3.6 billion was spent by countries fighting the epidemic. Guinea, Liberia, and Sierra Leone together lost $2.2 billion in gross domestic product in 2015. Sierra Leone’s private sector lost half of its workforce.

The most recent Ebola outbreak occurred in August 2018 in the Democratic Republic of the Congo. As of Jan. 28, 2020, it infected 3,421 people and killed 2,242 of them.


Dengue is a mosquito-transmitted viral disease that affects up to 100 million people a year. It has increased 30-fold over the last 50 years. It occurs in Asia and Latin America, but global warming is spreading its range as rising temperatures increase the geographic range of the mosquitoes that carry it. Since 2013, it’s appeared in Florida, Texas, and Hawaii among people who had not recently traveled to tropical areas.  The mosquitoes that carry dengue are found from California to Delaware.

The economic impact in the Americas is $2.1 billion per year. 


The Zika virus creates mild flu-like symptoms. It is rarely fatal. It can create severe birth defects, including microcephaly, as well as miscarriages, and stillbirths. In 2017, it affected as many as 100 million people, including 1.5 million pregnant women. The outbreak cost between $7 billion and $18 billion short-term. The long-term cost of caring for children with birth defects could be as high as $39 billion. 

If a similar outbreak hit the United States, the cost would be $10.3 billion if productivity losses are included. That’s if 10% of the population were infected. This is a lower infection rate than in some areas, where Zika has infected 32%-73% of people.

Like dengue, zika is a tropical disease that climate change is bringing to the United States. Since 2013, it’s appeared in Florida and Texas among people who had not recently traveled to tropical areas. The same mosquito that carries dengue can also transmit zika. Its range is throughout the southern United States from California to Delaware. Zika is also transmitted through sex, from a pregnant woman to her fetus, and, potentially, via blood transfusions. 

How Epidemics and Pandemics Affect You

Epidemic outbreaks occur somewhere every year. They result from mutations of existing strains and typically pass in a few months. Global pandemics occur every 10 years to 50 years, resulting from new virus subtypes to which humans haven’t developed an immunity. Many of them transfer from animals.

An epidemic is the rapid spread of disease that affects many people in a community or small region. A pandemic is the rapid spread of a disease that affects a large number of people across a much larger region, such as entire nations, or across the globe. 

If today’s society experienced a pandemic on the scale of the 1918 Spanish flu, it would kill millions of people and cost the world economy $3 trillion. In the United States, it would cause 1.9 million American deaths and cost the U.S. economy almost $200 billion. 

Climate change is increasing the risk of infectious disease. One reason is that the melting permafrost is releasing viruses and bacteria that have been dormant for thousands of years. Climate change also causes more frequent and stronger natural disasters that create infectious diseases. Sufferers come into contact with contaminated water from flooding sewage systems. 

What You Can Do

The best way to protect yourself against a global pandemic is to follow common sense. The new vaccine could take years, so until then: 

  • Stay at home as much as possible
  • If you must go out, wear a close-fitting mask
  • Stay six feet away from anyone outside of your family
  • Wash your hands often with soap and water
  • Don’t touch your eyes, nose, and mouth. This helps keep germs out of your body.

Since viruses mutate, the annual flu vaccine can offer only limited protection. It’s still worth getting, though, since it updates your antibodies to the most recent known flu mutation. It protects 60%-90% of vaccinated persons from infection and keeps most of them out of the hospital. 

If the pandemic is as bad as the 1918 Spanish flu, it could disrupt local businesses. In that case: 

  • Gather supplies, like extra food, water, and medicine 
  • Make an emergency plan for your family
  • Write down important health information like medications in case you need to go to the emergency room

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