News about the spread of avian influenza and the risk of a human pandemic has recently put the world on edge. Governments, corporations, financial and multilateral institutions, and the general public are all paying heightened attention to the risks posed by the disease. This is likely to catalyze better planning and preparedness at all levels. In the near term, however, few countermeasures are available to directly combat a global influenza pandemic other than traditional methods to increase social distance and improve community hygiene. If a pandemic were initiated within the next few months, it could, like SARS, trigger highly disruptive fear-based reactions that would quickly ripple through the global economy.

In this update, we review the potential economic implications of a pandemic, analyze the implications of the recent geographic spread of H5N1 in Asia and Europe, and evaluate recent responses by governments and multilateral institutions. Key conclusions include:

• The recent spread of the disease to some parts of Europe underscores the ongoing potential for further expansion of the geographical area across which H5N1 is endemic. High risk areas for future spread include the Rift Valley countries of Africa, and India/Pakistan/Bangladesh.
• Commitments by governments around the world to stockpile vaccines and antiviral drugs could soon exceed US$6 billion, more than ten times the amount committed toward measures to prevent or minimize disease emergence.
• International collaboration to address the risks posed by H5N1 has improved through key meetings, including the international gathering of health ministers in Ottawa, the APEC meeting in Brisbane and the World Bank meeting in Geneva. Coordination of border control policies in the event of a pandemic would be especially important from an economic perspective.
• Private companies are stepping up their efforts to develop contingency plans, and many are reviewing potential supply chain vulnerabilities in the event of economic disruptions in Asia or other regions.