Swine flu dampens economy

By Dena Aubin

NEW YORK (Reuters) - Fears that an outbreak of swine flu could become a pandemic brought a new threat to the global economy on Monday, just as some economic indicators appeared to be bottoming out.

Mexicans returned to work in large numbers after the weekend, despite worries over a virus that has killed up to 149 people there, and spread to the United States, Canada and Europe, but economists have warned that a global outbreak of deadly flu would seriously curtail economic activity.

The World Bank estimated in 2008 that a flu pandemic could cost $3 trillion (2 trillion pounds) and result in a nearly 5 percent drop in world gross domestic product.

An outbreak of severe acute respiratory syndrome, or SARS, which disrupted travel, trade and workplaces in 2003, cost the Asia Pacific region an estimated $40 billion. It lasted six months and killed 775 of the 8,000 people it infected in 25 countries.

The current flu outbreak tempered optimism that the global downturn could be starting to slow after governments committed trillions of dollars to interventions and stimulus.

"We almost have to wait to see not so much the contagion aspect but how deadly is this," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut. While a mild strain may have a limited impact, "if you start getting a number of fatalities, then it ramps the issue up substantially at every level, from a human standpoint and from an economic standpoint," he said.

In Washington, the Obama administration said it was too soon to determine the potential economic impact but U.S. Treasury officials were monitoring the situation.

Regardless of the effect of the virus on the global economy, International Monetary Fund Managing Director Dominique Strauss-Kahn said he did not see a global economic recovery before 2010.