Flu pandemic of 1918 hit poor economies hardest – ECB paper

Poorer countries’ economies were particularly affected by the influenza pandemic that began in 1918, a working paper published by the European Central Bank finds.  

In Macroeconomic risks across the globe due to the Spanish Flu, Roberto De Santis and Wouter Van der Veken use a non-linear method to assess how much different countries’ GDP declined during the pandemic.

The ECB paper finds that the typical country caused a cumulative fall in GDP of about 7.2%, with 70% of the damage occurring in the first year. These effects were especially severe in lower-income countries, they find. GDP fell by 52.1% in the typical lower income country in the first year of the pandemic, compared to 15.3% in the typical higher income country.

The authors find that the pandemic had especially strong effects on income distribution in poorer countries. Lower income countries suffered real income losses due to the pandemic more than double those of the typical higher income country every year between 1918 and 1920.

They argue that this was because it had “a disproportionate burden on low-skilled workers”. It was also because “infection diseases and their associated death toll can spread more rapidly in lower income countries given the high healthcare costs and public spending needed to contain the virus”.

These findings, they argue, are highly relevant to the current coronavirus pandemic. Their results, they say, support warnings from international development organisations that “the Covid-19 pandemic will leave deep scars in lower income countries, unless urgent policy action is taken with support from the international community”.