Financial crises in developing and transition countries have often proven disruptive to policies and programmes due to procyclical trends in government spending growth. Given the importance and significant proportion of public budgets devoted to education and health, cuts in government expenditures during recessions potentially place social programmes at risk. This paper analyses the experiences from 1995–2007 for 131 countries, projects fiscal social spending to 2013, and examines specific issues around fiscal social spending in the current crisis, including donor responses and government and household coping mechanisms.

Growth rate trends in education and health spending fluctuate over time, with greater volatility in education. Despite the variation on growth rate trends, absolute levels of fiscal spending rise steadily over time, with brief flat trends over one or two years, reflecting periods of GDP growth decline. Public spending tends to be more counter-cyclical for education compared to health. While sharp declines in growth rates of fiscal social spending are projected, they are balanced by projected increases in absolute spending over the 2008–2013 period.

The outbreak of Severe Acute Respiratory Syndrome (SARS) in the winter of 2002–03 raised the specter of a new, unknown and uncontrollable infectious disease that spreads quickly and is often fatal. Certain branches of economic activity, notably tourism, felt its impact almost at once, and investor expectations of a safe and controlled investment climate were brought into question. Part of the shock of SARS was the abrupt reversal of a mounting legacy of disease control that had altered societies’ expectations from coping with waves of epidemics of smallpox, cholera, and measles, among other diseases, to complacency with the virtual elimination of disease epidemics. This paper analyzes the economic implications of the Great Plague in the fourteenth century, the 1918–19 influenza epidemic, the HIV/AIDS curse and SARS to demonstrate the short- and long-term effects of different kinds of epidemics. The magnitude and nature of economic effects vary according to the duration and characteristics of the