The International Monetary Fund warned today that a bird flu pandemic could do serious harm to the global economy but said such a scenario was unlikely.

'A low probability but high impact risk is an outbreak of avian flu pandemic,' said Gerd Hausler, head of the IMF's international capital markets department. 'This could have a serious impact on international financial systems and the global economy,' he added.

Hausler said an outbreak might result in widespread absenteeism that could lead to 'a sharp and deep recession'. He urged governments to undertake adequate preparation to avoid a situation in which people panic and stay home from work.

Companies should review business continuity plans, he added, while banks and financial authorities should ensure they will be able to carry out basic operations even in the absence of significant numbers of staff.

Financial bodies should in addition take measures to make sure their systems would respond in the event of a sharp increase in internet banking operations.

Banks, meanwhile, need to ensure they have sufficient stocks of banknotes and the capacity to distribute them across their networks. 'Financial regulators may have to consider a degree of prudential forbearance,' he said.