Beyond the health crisis, Ebola hits Liberia’s economy hard

With over 400 deaths in Liberia and more than 1,000 across West Africa, the Ebola epidemic has been the deadliest in history and has spread fear and panic across the region. But beyond the terrifying health crisis, the Ebola outbreak threatens to reverse much of the economic and social progress Liberia has made over its decade of peace.

While GDP growth had averaged over 8% since 2011, it was already forecast to slow down to 5.9% in 2014 due to slower growth in iron ore production, weak timber and rubber exports growth, and the gradual drawdown of the United Nations force (UNMIL). However, restrictions on transportation and commerce, the withdrawal of international workers, a slowdown of investment, and a panicked population will further reduce growth this year. Containing the crisis rapidly will be critical to preserve the progress made, and to reduce risks to the short- and medium-term outlook.

Government measures to control the spread of the virus, including the quarantine of communities, restrictions on travel between counties, sealing land borders, and the closure of major markets, have severely restricted trade within Liberia and with its neighbours. Free movement has also been restricted with all but two airlines suspending flights with Liberia. Additionally, public fear of the disease has led many consumers, traders and businesses to stay home or otherwise limit their activity and potential exposure. Families and communities with Ebola cases are stigmatised, and neighbours, drivers and traders avoid them. This is reducing the supply of food, other goods and services throughout the country. Reports that ships from Liberia are being blocked in Côte d’Ivoire would exacerbate this, especially for fuel supplies, which would have a severe impact on transportation and power availability.

Liberia imports more than 60% of the rice it consumes, but some areas are self-sufficient in rice production. One of the epicenters of the outbreak – Lofa county – produces around 20% of Liberia’s rice and largely meets its own rice demand while producing numerous other crops and trading with cross-border markets and Monrovia. However, some fields are being deserted, and after months of slower trade with Sierra Leone, there are already reports of food shortages and discussion of the need for food drops. Quarantine measures will further cut off rural areas and restrict trade with Monrovia.

The unprecedented spread to a major urban centre is changing local transportation. Taxis have reduced the number of passengers they will hold from six to four in order to reduce physical contact, while also nearly doubling the cost to passengers.

Consumers have stocked up on food and essential goods, pushing up their prices, but they are reducing their purchases of non-essential goods. The temporary closure of government offices for all but core staff has reduced sales at shops and from traders in central Monrovia. This all contributes to lower incomes and worsening purchasing power, which affects Liberia’s poor the most.

Added to this is the large-scale departure of much of the substantial expatriate community and Liberians who had been gradually returning after the war. Not only will the country lose their skills in the private sector and donor projects, but the service economy that has developed to meet their higher incomes is suffering from a substantial drop in activity. Hotels and restaurants are increasingly vacant. One of Monrovia’s most popular hotels reports only a 30% occupancy rate, with the few remaining guests from the Center for Disease Control (CDC), World Health Organization (WHO), and similar health agencies. Real estate owners will suffer the impact slower, with many expatriates holding year-long leases paid up front.

The concessions sector, with some US$16bn in foreign direct investment commitments, has led aggregate growth in Liberia since the end of the war, but it has not escaped the crisis. Iron ore has been the largest export over the past two years due to production from the ArcelorMittal mine.

While the company is continuing production and still expects to produce 5m tonnes of iron ore this year, its expansion from 5m to 15m tonnes by the end of 2015 has been delayed after the 15 contractors involved evacuated their 645 employees. China Union, which was expected to produce 500,000 tonnes of iron ore this year, has temporarily halted operations, following reports of six suspected cases of Ebola at its company-run hospital.