As the Zika virus spreads across the globe, the economic cost of the illness is proving difficult to quantify. Some geographies and sectors are being hit harder than others. Meanwhile, the short- and long-term cost of treating affected individuals could weigh heavily on already-strained public finances in certain regions, which in turn could have repercussions on the global business environment.
Origins and Rapid Growth
Zika was first recorded in Uganda and Tanzania in 1952. Prior to 2015, Zika virus outbreaks occurred in areas of Africa, Southeast Asia, and the Pacific islands. The current epidemic was first noted in Brazil in May 2015.
Latin America and the Caribbean are the most affected so far, with 40 countries and territories having confirmed transmission of the virus in those regions, according to the Pan-American Health Organization (PAHO). An increasing number of Zika cases have been observed in Costa Rica, French Guiana, Guadeloupe, Guatemala, Jamaica, Mexico, Puerto Rico, Saint Barthelemy, and Saint Martin.
At the time of this writing, there have been no recorded cases of locally acquired, mosquito-borne Zika transmission anywhere in the continental US. However, there has been one Zika-linked death in Utah, and 1,132 travel-related cases have been reported in America between January 1, 2015 and July 6, 2016, according to the US Center for Disease Control and Prevention (CDC). The highest travel-related occurrences have been in New York (285 cases) and Florida (206 cases).
In early July President Barack Obama asked the US congress for $1.9 billion in funding to aid in the fight against Zika. Funds would go towards mosquito abatement, vaccine development, and diagnostic tools for the prevention and eventual extermination of the virus.
Perhaps a more worrying development for the US is the spread of the virus in US territories. Of specific concern is Puerto Rico, which is climatically conducive to the Aedes aegypti mosquito, the primary transmitter of Zika. The CDC has projected that as much as 25% of the island’s 3.5 million people could be infected with Zika by year’s end.
Geographically, roughly 75% of the island has already been affected. Some 2,000 Puerto Ricans have tested positive for Zika, including roughly 300 pregnant women. One Zika-related death has been confirmed, and experts believe there are thousands of asymptomatic infected persons.
Brazil has been particularly hit hard; between January and April 2016, the country has recorded nearly 91,400 cases of the virus. It is hosting the Summer Olympics in mere weeks, and several athletes have pulled out citing fears of contracting the virus. The country is using a multipronged vector-control strategy to fight Zika as it prepares for the games, including the use of genetically modified mosquitoes to reduce the Aedes aegypti population. Brazilian authorities are claiming that visitors have a “nearly zero” chance of becoming infected.
While experts agree that the risk has been significantly lowered in the past several months, partially because it is now winter in Brazil, they dispute that the risk is really close to zero. Notably, there have been improvements in surveillance and detection rates in the region.
Firms in the health sector and related industries could benefit from the fight to eradicate Zika. For example, the demand for vector control products will continue to rise while R&D funding may increase in the race to create a vaccine.
Tourism-related sectors (excluding perhaps travel insurance) may suffer. A protracted fall in leisure-travel arrivals could depress growth in tourism-dependent economies in the region. A key example of this is Puerto Rico, where around 10% of GDP is derived from travel and tourism.
As with most epidemics in the last several decades, fear plays a major role in how businesses respond. D&B has therefore advised customers to ensure that business decisions are made on reliable information with regards to Zika. Failure to do so could inflate the already-high risk perception and lead to suboptimal business planning.
Michelle Campbell is a Senior Economist on D&B’s Global Data, Insight & Analytics team. Based in the UK, she covers the Latin American region for D&B Macro Market Country Insight Products. In addition to her experience in the financial services sector, Campbell has worked as a visiting lecturer in the UK and in the Caribbean. Michelle holds a master of science degree in economics from the University of the West Indies in Trinidad.