An Ebola treatment camp in Monrovia, Liberia. Some argue that the fear brought about by Ebola, rather than the virus itself, will have more devastating results for Africa's people as investors limit their involvement in the country 

2014 held promise for three countries ravaged during the second half of the 20th century by inner conflict and war. Sierra Leone was to rank first among Africa’s fastest growing economies according to the IMF. Guinea and Liberia were set to auction off iron ore worth billions of dollars.

Then in March the largest ever Ebola outbreak hit those economies. Airlines begun suspending flights to the regions, public health services unable to deal with the scale of the outbreak started to collapse and quarantines introduced to help curb the spread led to a decrease in trade, mining and service sector activity. “The key economic sectors in these countries – mining, agriculture, services – have all been debilitated really”, Abebe Selassie, Deputy Director for the African Department at IMF told World Finance.

The outbreak of the fatal virus had such a large impact that the IMF reviewed its forecasts for the growth of the three economies this year, cutting predictions for Guinea from 3.5 to 2.4 percent and from 5.9 to 2.5 percent for Liberia (against 8.7 percent last year). It brought Sierra Leone’s forecasted 11.3 percent down to eight percent; that’s almost half the rate of growth seen in 2012, when the country’s growth rate hit 15.2 percent, indicating a booming mineral extraction industry and a final recovery from the violent civil war which plagued it for 14 years.

Restricted movement
Alongside the medium-term impact, short-term effects are already being seen. According to the UN, prices of cassava – one of Liberia’s staple starch foods – rose by 150 percent in early August in the country’s capital Monrovia, while prices of basic staples including palm oil, rice and fish had likewise increased in Sierra Leone, the finance ministry said. Those increases are unsurprising given that inflation is rising while the movement of goods is suffering, as a result of closed borders and general fear of contact. “Trade in all three countries has really been closed down,” said Selassie. As well as trade within the countries themselves they rely on intra-trade; Guinea’s normal trade with Senegal and Sierra Leone has been shut off while Liberia’s trade with Cote D’Ivoire has likewise been curtailed.

Sierra Leone relies on cocoa trade and that needs to continue in order to support its communities, according to Tavneet Suri, Professor of Applied Economics at MIT who is leading a research study in the country with the International Growth Centre (IGC). “They need to make sure cocoa’s getting out because it’s a big pot of income for people of these areas”. She added that the disease itself is having a negative impact on the country’s agriculture by physically preventing people from harvesting their crops.

Aside from physically debilitating factors slowing trade, much of the reduced movement is a result of precaution. That fear is arguably ungrounded given that Ebola isn’t a highly contagious disease – it’s spread through blood or bodily fluids rather than being airborne.

In August Sierra Leone implemented its ‘cordon sanitaire’, enforcing military roadblocks around Ebola-infected regions of the Kailahun and Kenema districts. The extremity of cordons as a measure is clear; the last time they were implemented was during World War I to stop typhus spreading from Russia to Poland. It’s again a result of panic-induced precaution and likely to have negative economic consequences.

Minor price increases have been seen in cordoned regions according to the IGC report, with price spikes apparent in Kaliahun markets and prices of imported rice slightly above the norm for the rest of the country. Its finance ministry cited a “shortage of basic food items in the markets [in Kenema], especially in the urban areas” according to a report by The New York Times. In the harvest season a lot of communities rely on labour from outside and the cordons could affect this. “There’s lots of discussion about whether labour can move around in the harvest season. I think that’s the biggest question”, said Suri. “If traders can’t the rice will either go bad or not get traded”.

Divergent forecasts
An analysis by the World Bank estimated the best and worst possible economic scenarios; if the virus is brought under control quickly, its forecasts said economic output for Guinea, Liberia and Sierra Leone in the medium-term would fall by $43m (one percent), $82m (4.2 percent) and $59m (1.2 percent) respectively, marking a combined loss across the three countries of $97m (see Fig. 1). That reduction in growth would jump to a staggering total of $809m in the medium-term if the disease were not contained and if the panic-induced preventative measures put in place continue. It would see Liberia, the worst hit country due to its weaker economic capacity, fall by 11.7 percent ($228m) and Sierra Leone by 8.9 percent ($439m).

“The analysis finds that the largest economic effects of the crisis are not as a result of the direct costs… but rather those resulting from aversion behaviour driven by fear of contagion”, it said in the statement. “This in turn leads to a fear of association with others and reduces labour force participation, closes places of employment [and] disrupts transportation.” That’s apparently common; the World Bank attributed 80 to 90 percent of the economic impact of recent epidemics to behavioural factors rather than to the diseases themselves (see Fig. 2).

Those anxiety-induced measures are causing a significant drop in revenue. The World Bank estimates a fiscal dent in Liberia amounting to 4.7 percent of GDP ($93m), and 1.8 percent of Sierra Leone and Guinea’s ($79m and $120m respectively). It predicts an even greater gap for 2015. The IMF is contributing an interest-free loan of $127m in order to pump up the countries’ fiscal budgets, but it predicts a total financial shortfall of nearly $300m for the next nine months. The WHO requested $1bn-worth of international funding while the World Bank and the EU plan on funding up to 20 percent of the overall financial gap. The UN stated that a total of $988m was needed in order to completely control the epidemic.

The fiscal shortfall comprises several aspects; medical staff and equipment are in limited supply, funding is needed to curb the crisis itself and governments need to provide additional resources to suffering communities. “It’s very important that governments are not going to be cutting from one part of the budget to try and resource this”, said Selassie. “I think a lot of the money so far has been directed to frontline agencies. It’s important to not ignore also the government’s own resource needs,” he added. In Sierra Leone the government is attempting to get supplies to cordoned districts and in September it implemented a three-day lockdown, encouraging locals to stay at home to receive drop-ins educating them about the disease; such initiatives are costly and painful to a fiscal budget already feeling the strain.

Business and border closures
The drop in state revenue is coming from a multitude of factors, not least a decline in business, taxes and exports, according to the IMF. The finance ministry said Sierra Leone’s three largest producers have been “scaling down” while in Freetown, the country’s capital, hotels have lost 40 percent of their custom.

That’s not surprising given the flight restrictions and border closures. Kenya, Rwanda, Zambia, Saudi Arabia and Senegal suspended all flights to and from the three worst affected countries, which themselves shut many borders. South Africa meanwhile banned all flight entry from non-citizens coming from affected areas. Such measures, implemented again out of fear, are unnecessary; both the UN and the WHO pushed for the bans to be removed and replaced by alternatives such as airport screening. Add that to the fact the majority of Ebola sufferers only contract the disease when living with or caring for those infected, according to the Centers for Disease Control and Prevention, and it seems clear that the economic losses are more threatening than the risks of catching the disease itself.

That’s even more apparent in Nigeria, to which both Chad and Cameroon closed their borders despite only a limited number of cases there by that time. Even Senegal, after just one case reported, felt the effects according to Selassie. “We have seen cancellation of bookings, holidays and business travel, so that has had a perceptible impact”. British Airways, Emirates, Kenya Airways and Air France-KLM all suspended at least some of their flights to the areas and shipping was also curtailed. Those transport restrictions led to delays in essential medical equipment; Brussels Airlines – which had a three-day suspension of its flights – had a backlog of 80 tonnes worth of mining equipment and medical supplies meant for the Ebola regions.

Curtailing foreign travel naturally has a negative impact on foreign investment and that investment is vital for the survival of the three emerging economies, as recognised by David McLachlan-Karr, UN country co-ordinator for Sierra Leone. “The single biggest concern is the longer-term impact on development aspirations, which is premised on high foreign investment and high earnings,” he told The Guardian. Dwindling investment interest in the firm London Mining is a prime example. The company was to triple its mining output from Sierra Leone over the next 10 years according to a report by The Guardian. It cut those predictions partly as a result of the outbreak, and shares in the company plummeted 19 percent.

Indeed mining, on which Sierra Leone relies for its economy (accounting for 75 percent of the country’s 20 percent growth in 2013), has been dealt a painful blow, with key factory officials leaving and workers confined due to restricted movement according to the IMF. “Mining operations in Sierra Leone and Liberia have been scaled back, so these are going to be affected in the short-term”, said Selassie. “And in the medium-term there’s a lot of prospering activity that was taking place in all three countries so that’s of course been scaled back very significantly”.

Impossible to predict
It is clear that Ebola is taking its toll economically – but a gaping lack of actual data makes the exact impact difficult to measure. That is evident through conflicting figures from different bodies; forecasts by economists at risk consultancy IHS put Liberia’s growth for 2014 at 0.8 percent – significantly lower than the IMF’s 2.5 percent prediction. Those forecasts are likely to curb foreign investment further yet – ironically making them more likely to become a reality. “These are all stories – we don’t have numbers,” said Suri. Governments have to come up with immediate estimates to target their spending, but firm data is needed to make those estimates as accurate as possible.

It’s likewise ultimately impossible to predict exactly how long the effects will last. Selassie predicts it will take until at least early next year before the outbreak is curbed. Even then the economy will continue to feel the effects of the measures put in place. “My guess would be that it will take quite a bit of time to recover back to pre-crisis activity”, he said.

What’s clear is that the majority of measures put in place have been driven by terror ungrounded in fact, leading to overly cautious, unnecessary and economically damaging actions. They could be replaced by sensible preventative methods such as educating people to mitigate fears and dispel myths. As it stands, the panic reaction to the devastating situation – from physical cordons to a psychological unwillingness to cross borders – is likely to have significant economic impact both in the short, medium and long-term. What’s also clear is that it’s likely to affect poor communities and the overall economic growth of the countries themselves almost as much as, if not more than, the disease itself.