Severe bird flu pandemic could pose risk to global financial system - IMF
03.13.2006, 11:15 AM

BEIJING (AFX) - A severe avian flu pandemic could pose risks to the global financial system due to sharp changes in asset prices and operational risks arising from absenteeism, the International Monetary Fund (IMF) said.

'If the pandemic is severe, the economic impact is likely to be significant, though predictions are subject to a high degree of uncertainty,' the IMF said in a report providing a preliminary assessment of the risks and potential impact to the global economy from such a pandemic.

The IMF said that while the severity of a pandemic is impossible to predict, a pandemic similar to the 1918 Spanish Flu could result in not only a high death toll, but a sharp, although temporary, decline in global economic activity.

A severe pandemic would most likely lead to higher levels of risk aversion and a consequent surge in demand for liquidity, specifically cash and low-risk assets, the IMF said.