Will Swine Flu Stunt Economic Recovery?

As swine flu spreads, so do fears that it will deepen the current global economic downturn. The effects of the virus have already gone airborne, striking a blow to a travel industry already severely hobbled by the recession. The U.S. has warned against non-essential travel to Mexico and now the European Union has urged its citizens to stay away from flu-affected areas abroad. Even cruiselines are cancelling stops to certain ports.

It’s difficult to say what a vast swine flu outbreak would cost the economy. The better question is how could it slow down a recovery that we are just beginning to see take shape?

Michelle Higgins, travel columnist for the New York Times, says there are signs that the global tourism industry is taking proactive steps to address the fears. Many airlines, including United, JetBlue and American, are offering customers the opportunity to postpone their trips by waiving cancellation and change fees. Hotel chains such as Starwood are doing this too, she says, as are some online booking services.

The biggest economic blow so far has been in Mexico, where drug-related violence has already drastically hurt the country’s vast tourism industry during one of its busiest times of year. The swine flu outbreak is doing nothing to help a recovery there. In the U.S., the government is trying to strike a balance between informing the public, mobilizing a response and at the same time not discouraging people from traveling, according to Higgins.

If you decide to travel, especially if it’s somewhere with known swine flu cases (you can see a live map of the areas in the world with confirmed cases here), it is important to follow the list of precautions listed on the CDC’s website. You should also be aware that you may be scrutinized at foreign airports and if you cross any international borders.

In terms of damage done to the economy, there is reason to be optimistic. Ivory Johnson, director of financial planning for Scarborough Capital Management, is doubtful that even a prolonged swine flu outbreak will stunt global economic growth “in and of itself.” Corporate earnings are still what make stocks move, he says, and the long-term consequences of swine flu are unlikely to dent earnings as a whole.