Zika A Public Health, Not An Economic, Crisis

Economists don’t anticipate a major economic impact from the mosquito-born Zika virus—so far, at least—although it’s certainly a kick in the shins for struggling Brazil and an overhang for tourism in Latin America.

Although Zika “is clearly a public health issue and there is still a large degree of economic uncertainty, as things stand, the economic impact is likely to be small, [and] we don’t expect it to be a major drag on the region’s economic growth this year,” says Adam Collins of Capital Economics.

Zika, which was first discovered in Uganda in 1947, erupted in Brazil last year and is spreading quickly. The US Centers for Disease Control and Prevention has issued travel alerts for 30 countries and territories. There have been thousands of cases reported and four million potential infections throughout the Americas this year. The reason Zika is grabbing global headlines and the World Health Organization declared it a public health emergency on February 1 is its suspected link to brain deformities in babies whose mothers contract the virus while pregnant. Otherwise, symptoms are generally mild. Pregnant women are avoiding trips to contaminated areas. But this demographic, notes Amanda Bourlier of Euromonitor, “represents a relatively small subset of total travelers.”

Unlike the Ebola epidemic in West Africa in 2014—2015 and SARS in southern China in 2004—2005, both of which substantially suppressed economic activity, Zika can’t be passed easily from person to person. “The fear of being infected with Zika is very unlikely to prevent people from going to work or shopping. As such, it is highly unlikely to disrupt consumption, investment or trade flows,” Collins says.

Tourism will be harder hit, he acknowledges, estimating that the industry, including its ripple effects throughout the economy, makes up 10% of GDP in Latin America and 9% in Brazil. But SARS showed that international tourism rebounds fast once an outbreak is contained, he says. If it’s not fast enough to prevent a toll on attendance at the Summer Olympics, to be held in Rio de Janeiro in August, then Brazil’s economic boost from the games could be smaller than anticipated. But the country, economists say, has bigger problems. The Olympics were never going pull it out of negative growth, Zika or no.