Flu outbreak to weigh on slowing Argentina economy

Business Materials 15 July 2009 03:41 (UTC +04:00)

A deadly outbreak of the H1N1 flu could deepen an economic slowdown in Argentina, South America's second-biggest economy, and shave nearly one percentage point off gross domestic product this year, analysts say, Reuters reported.

Health officials have sought to halt the spread of the virus, which has killed 137 people during the Southern Hemisphere winter, by closing schools and urging Argentines to avoid crowded places like shopping centers.

Tourism, a growing sector of the economy, has been particularly hard hit, as many foreign travelers worried about being exposed to the virus cancel trips. Brazil has advised people to postpone non-urgent travel to Argentina.

"The economy's clearly being affected by the H1N1 virus," said Fausto Spotorno, chief economist at Orlando J. Ferreres & Asociados, an Argentine consulting group.

Total economic losses from the outbreak could reach $2.5 billion as consumer spending falls off, analysts say.

Argentina's economy has grown by at least 6.8 percent in each of the last six years, but the global recession and political uncertainties have cooled agricultural and factory output and domestic consumption.

President Cristina Fernandez has said the economy will grow this year, but many private analysts predict a contraction.

Spotorno said he expected the economy to shrink between 4.5 percent and 5.5 percent this year, depending on the extent of the flu outbreak. If it stretches on for more than a month, it could knock off 0.9 percentage points of GDP, he said.


Jose Luis Espert, chief economist at the Espert and Associates consultants in Buenos Aires, said the virus would likely have a negative impact on growth in the third quarter.

He expects a non-seasonally adjusted contraction of 0.8 percent, a revision from his previous estimate of 0.5 percent.

The Argentine economy grew 2 percent in the first quarter compared with the same period a year ago, the slowest rate since late 2002.

A two-year controversy over accusations the government is manipulating economic data for political gain has fueled doubts among economists and analysts about official growth figures.

Argentina's government has confirmed more than 3,000 cases of the new flu strain, which emerged in the United States and Mexico earlier this year.

A recent survey by the Tres de Febrero University said more than 70 percent of Argentines living in Buenos Aires and its surrounding areas have cut back on going to cinemas, theaters and shopping centers in recent weeks.

The region is home to 40 percent of Argentina's population.

As the peak winter travel season starts, hotel operators in the Patagonian resort of Bariloche, Latin America's biggest ski town, say are they grappling with 50 percent occupancy rates.

Buenos Aires hotel owners are also worried about falling bookings.

"Brazilian tourists have massively canceled reservations because of the virus. But we hope it'll pick up in the second half of August," said Gonzalo del Campo, manager of the Nuss hotel.