Will swine flu push the world into deflation?

摘要

As a conclusion, while the UK economy should in principle be able to cope with a swine flu pandemic, there is a significant risk that the pandemic triggers a set of unfavourable behavioural changes that tip it into deflation. A flu outbreak in the autumn would hit just as the economy starts to recover from the credit crunch. It would threaten already fragile businesses and put further strains on financial markets and fiscal balances. This could generate a vicious cycle that postpones the recovery for another couple of years. The fact that UK households' balance sheets are more stretched than in many other countries makes the risk of deflationary dynamics larger than elsewhere.