Zika: World Bank Releases Initial Short Term Projections of Economic Impact on LAC Region

Alicia Nicholls

The prominence given to the mosquito-borne Zika Virus epidemic by Caribbean Community (CARICOM) Heads of Government at their 27^th Intersessional Conference last week demonstrates that like its vector, the Aedes Aegypti Mosquito, the Zika Virus is turning out to be more than a mere pest for the Region. The outbreak is occurring at the height of a booming winter tourism season, bringing with it fears that the travel warnings and cancellations could spell disaster for tourist arrivals, with deleterious effects on our small open economies which are still struggling to recover in the wake of the global recession of 2008.

Attempting to quantify the magnitude of the threat, the World Bank last week released its initial estimates of the short-term economic impact of Zika on Latin America and the Caribbean (LAC).  The main findings were as follows:

• In aggregate the economic impact on the LAC Region in terms of foregone GDP is forecast to be pretty modest (a total of US$3.5 billion or 0.06% of GDP).
• Fiscal revenues foregone in the LAC Region are forecasted to be a total of 420 million of 0.01% of GDP.

One of the assumptions made by the World Bank in its modelling was that “the erosion of revenues will be mostly driven by the effort to avoid infection of pregnant women and women trying to become pregnant planning to travel to the region with their families”.

However, the aggregate numbers only tell part of the story. The World Bank emphasized that for smaller tourism-dependent islands such as the Bahamas, Antigua & Barbuda and Barbados, the projected impacts are estimated to be “in excess of 1 percent of their GDP”.

So far tourism officials  in the Caribbean Region have indicated there has been no major impact on the Caribbean region’s main export, the tourism sector, just yet. But the Caribbean Tourism Organisation’s State of the Industry Media Conference held last week clearly reiterated that despite a mostly positive outlook for regional tourism growth in 2016, the Zika threat is one which the region’s official public sector tourism trade organisation is monitoring closely and the organisation has tempered its tourism growth forecasts for 2016 accordingly.

Besides the projected disproportionate impact on the Caribbean, the World Bank has cautioned that its estimates are based on the assumption that there will be a “swift, coordinated international response to the epidemic” and that its assumptions have the drawback of being made in a context where much is still unknown about the disease. For instance, despite anecdotal evidence, there is still no conclusive scientific link between Zika and Guillain-Barre Syndrome or its transmission through sexual intercourse. As noted above, the World Bank’s model assumes that the avoidance behaviour will be mostly driven by pregnant women and women trying to become pregnant and not those who fear sexual transmission of the disease. It has cautioned therefore that should science confirm sexual transmission, for instance, or should  there be a sharp increase in public perceptions about the Zika risks  “then the [human and economic] impacts could be much larger and will need to be re-assessed”.

What the World Bank has stressed is the need for acting with alacrity to control the spread of the disease through a “coordinated and swift response”.  To this effect, the World Bank group announced in a press release that it was making $150 million available to assist LAC countries’ efforts to combat the Zika virus, including the provision of technical assistance teams. The World Bank in its report noted that tourism-dependent countries in the Caribbean may “require additional support from the international community to stem the economic impact of the virus”.  It is encouraging, therefore, to see that in the press release previously mentioned, World Bank Group President, Jim Yong Kim is quoted as stating “[t]he World Bank stands ready to support the countries affected by this health crisis and to provide additional support if needed”.

This financial support will be a much needed intervention for some of measures to combat the spread of Zika which were discussed by CARICOM Heads of Government during the Intersessional Meeting in Belize last week. According to statements attributed to CARICOM Chairman, Prime Minister, the Honourable Dean Barrow of Belize, the measures include continuous public education and implementation of measures at ports of entry, tourism facilities, factories, schools and other businesses. There is also to be a Mosquito Awareness Week. Trade policy has also been given  a role to play through the proposed reduction of import taxes on mosquito defense systems such as insecticides and mosquito nets, similar to what Antigua & Barbuda’s cabinet recently did.

The Zika epidemic has come at a very inopportune time for Caribbean economies and for regional tourism. Despite a record 7% growth in arrivals to the Caribbean in 2015 (according to CTO’s estimates), most regional economies are still plagued by high debt burdens, wide current account and fiscal deficits, limited GDP growth and competitiveness challenges.

Continued action at the national and regional levels among governments, regional and national public health and tourism institutions and civil society will be needed to ensure proper and well-coordinated response plans to reduce the spread of the disease and lessen its human and economic impact on the Region. Financing from international agencies and multilateral development banks like the World Bank will have an important role to play in providing not just financing but technical assistance for these efforts.

For the full World Bank report, please visit here:

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.