Goldman Sachs Plays Down Ebola Concerns, Says Cocoa At Greatest Risk

A team of analysts at Goldman Sachs published a report this week examining the potential economic and market implications in the event of an Ebola outbreak.

"We find that the economic costs of pandemics can be severe, but that the hit to growth is usually mostly limited to the region where the disease is centered," the analysts noted. "The economic outcomes of a pandemic are often largely determined by an outbreak's secondary effects, such as the “fear factor” and policy responses."

The analysts add that most impacts on the equity markets are short-lived and driven more by sentiment than by any tangible effects on business activity, with the possible exception being the mining sector. Nevertheless, Ebola is not expected to cause shifts in demand and supply balances across commodities, with cocoa being an unlikely, but still possible, exception.

Economics: Goldman Sachs expects a "small" global economic impact only if a global Ebola outbreak is contained, fears do not escalate and policy responses from governments are “commensurate” with the actual threat posed to the public.

Commodities: Goldman Sachs notes that the world's cocoa supplies would be threatened if an Ebola outbreak spreads to Ghana and the Ivory Coast where 70 percent of the world's cocoa supplies are located. Nigeria's energy production is offshore, implying the likelihood of supply disruptions being low.

Airlines/Aerospace: Goldman Sachs sees Ebola inflicting a major hit on airlines only in the event of a global spread of Ebola. West Africa currently maintains a small share of global air traffic with limited interconnectivity to key global routes.

Healthcare: Goldman Sachs notes that from a historical perspective pandemics have not had a meaningful or sustainable impact on companies within the healthcare sector. It is possible for company specific upside (such as increased orders) or downside (for example, hospital occupancy) issues to arise.

Lodging, Leisure and Travel: Goldman Sachs sees any potential impact to the sector stemming from Ebola will be secondary to broader consumer and economic conditions.

Mining: Goldman Sachs believes that mining companies in West Africa will continue to experience difficulties in operating and executing on development plans until the outbreak in the region is controlled.

Retail: Goldman Sachs expects luxury retail will suffer if air travel declines. The analysts note that "contagion fears" are capable of lowering consumer demand, as happened in Hong Kong during the SARS outbreak. However, in its current form, Ebola is unlikely to affect the overall retail sector.