The Fear Factor: A Back-Of-The-Envelope Calculation on the Economic Risk of an Ebola Scare in the Caribbean

Dec 2014
This brief presents simulations of an Ebola scare in the Caribbean, including three highly tourism-dependent economies, The Bahamas, Barbados, and Jamaica. On the basis of the experience of Mexico in 2009 with swine flu, we simulate a short but sharp drop in tourist arrivals resulting from tourists' worries about Ebola. The Caribbean is special in that tourism contributes directly and indirectly up to half of its GDP. The simulations indicate that the volatility of tourism combined with that dependence creates significant vulnerability for the region. Under the worst-case scenario, a noticeable impact could be expected even in countries with a smaller dependence on tourism. In addition, declines could also be expected for employment and revenues. However, 'pandemic scares' can be short-lived and the simulations indicate that the Caribbean would be able to absorb a short tourism drop. The intensity and duration of the outfall in tourism would depend on the real and perceived preparedness of the affected countries, highlighting that countries in the Caribbean need to not only avoid or minimize any Ebola cases but also ensure that tourists perceive these countries as safe places.