The Potential Economic Impact of Avian Flu Pandemic on Taiwan

This study analyzes the potential consequences of an outbreak of avian influenza (H5N1) on Taiwan¡¦s macro economy and individual industries. Both the Input-Output (IO) Analysis Model and Computable General Equilibrium (CGE) Model are used to simulate the possible damage brought by lowering domestic consumption, export, and labor supply. The simulation results indicates that if the disease is confined within the poultry sector, then the impact on real GDP is around -0.1%~-0.4%. Once it becomes a human-to-human pandemic, the IO analysis suggests that the potential impacts on real GDP would be as much as -4.2%~-5.9% while labor demand would decrease 4.9%~6.4%. In the CGE analysis, which allows for resource mobility and substitutions through price adjustments, the real GDP and labor demand would contract 2.0%~2.4% and 2.2%~2.4%, respectively, and bringing down consumer prices by 3%. As for the individual sector, the outbreak will not only damage the poultry sector and its upstream and downstream industries, but also affect the service sectors including wholesale, retail, trade, air transportation, restaurants, as well as healthcare services. These results can be used to support public investment in animal disease control measures.