Wednesday, September 13 2006 17:48 Hrs (IST) - World Time -

Singapore: The World Bank warned of a 'sharp decline' in economic activities if the current strain of bird flu mutates into a strain transmittable between humans.



"The extent of the decline and the prospects for a rapid recovery would depend on the characteristics of the new virus, as well as on the degree of preparedness in both the public and private sectors," the World Bank said Tuesday in its Global Financial Stability Report.

The report was released ahead of the week-long International Monetary Fund (INF) and World Bank's annual meeting in Singapore.

A pandemic would pose important risks for the global financial system, it said while elaborating on downside risks to be considered while the global financial markets remain strong.

The report addressed the possibility of a period in which net capital flows to emerging markets decline, perhaps substantially for countries with relatively week fundamentals.

Operational risks could arise from high absenteeism disrupting critical functions and services of the financial system, including payments, clearing and settlement, and trading.

"Preparation in the form of business continuity plans can go a long way to minimise the potential for such costly disruptions," the World Bank said.

Indonesia and Vietnam have been the hardest hit by the disease since 2003.

The IMF is encouraging countries to prepare for a possible pandemic and has been organising regional seminars that bring together central banks and supervisory authorities, health experts, and business continuity planners.