Fitch Ratings sees mpox worsening economic, fiscal woes

The potential spread of mpox in sub-Saharan Africa could negatively impact economic activity and fiscal metrics in affected countries, compounding the human suffering caused by the virus, Fitch Ratings has said.

The credit rating agency, however, sees donors and official multilateral partners partially offsetting any financial losses caused by such a situation, noting that the timing and size of donation is uncertain.

“In the event of a substantial increase in mpox case counts, the main impact on economies from the virus and the measures to counter it would likely be on consumption and production,” the agency said in a statement released on Wednesday.

“There could be challenges managing inflationary effects, especially if food production or logistics are significantly disrupted. Fiscal metrics would also be affected, with weaker economic activity depressing tax revenues, and higher government spending on healthcare and epidemic-prevention measures.”

The World Health Organisation declared the upsurge of mpox in the Democratic Republic of Congo (DRC) and a growing number of African countries a public health emergency of international concern on August 14.

Several Fitch-rated sub-Saharan countries, including Côte d’Ivoire, Kenya, Rwanda, South Africa, and Uganda, reported confirmed monkeypox cases between July and August.

In most of these, the number of confirmed mpox cases is very low, often in the single digits.

However, there could be underreporting in some countries and the emergency declaration highlights the potential for case numbers to rise sharply, bringing the prospect of financial pressure for affected sovereigns, the agency stated.

“Virus outbreaks can have significant economic and fiscal effects, as was demonstrated by the Covid-19 pandemic and the 2014-2015 Ebola epidemic in West Africa. The latter shock resulted in sharply lower economic growth and a widening of budget deficits in the main affected countries, Liberia, Guinea and Sierra Leone, although it is difficult to disaggregate the effects of Ebola from those of the concurrent fall in commodity prices,” it said.

It also highlighted that past outbreaks are an imperfect guide to future risks. For example, mpox has so far had a significantly lower fatality rate than Ebola, which means economic activity may be less directly affected.

Some vaccines are available to be deployed against mpox, though at present access to these vaccines remains relatively limited in SSA, it added.

A previous public health emergency of international concern over a global mpox outbreak, lasting from July 2022 to May 2023, did not significantly impact key credit metrics for affected sovereigns.

But if the current outbreak escalates, fitch believes tourism could be hit, a potentially significant factor in Kenya, Rwanda and Uganda – where UN Tourism data indicate tourism accounted for 11 per cent, 20 per cent and 19 per cent, respectively, of total goods and services export earnings in 2022.

While it sees international assistance mitigating these effects, it says it might tarry. The World Bank has estimated that over 2014-2015 grants reached nearly 19 percent of GDP in Liberia, almost 10 percent of GDP in Sierra Leone and about five percent in Guinea.

However, budget deficits in these countries were significantly wider on average over the period, even including grants, than they were in 2013.

“Rating effects would depend on the severity and the longevity of the economic and fiscal impact of the virus and the availability and size of donor support,” it said.