Bird Flu Fears


Economic News

22 Jul 2010
Text size +-

The death of three teenagers in eastern Turkey from bird flu last week has caused alarm countrywide. With the virus now having crossed Anatolia and jumped the Bosphorus to reach European Istanbul, fears of a major epidemic are also growing.

Yet while there is little disagreement over how tragic the loss of life already is, analysts are divided on just how an outbreak might affect Turkey's economy. The predictions range from the apocalyptic to the dismissive, but have already affected the country's agricultural sector badly.

In particular, Turkish poultry giants Banvit and Seker Pilic have seen their share values tumble on the Istanbul Stock Exchange, as have general meat producers such as Pinar Et. On January 6, after the virus claimed a third victim, Pinar Et and Banvit issued statements saying that their modern chicken coops were virus free, yet this was not enough to prevent Pinar's shares falling 2.04% on the day, while Banvit fell 2.26% and Seker Pilic 2.4%. This bucked the overall trend too, as the exchange closed that day otherwise on a record high.

The poultry sector has been in trouble for some time though. Back in October 2005, the first outbreak of avian flu - in the north-western region of Balikesir - led to a share price rout, as well as a ban on poultry imports by the EU. Switzerland and Ukraine also then issued similar prohibitions.

Thus the deadly virus - which principally affects birds rather than humans, but which does occasionally leap across species - has clearly already been bad for the sector. Yet like the virus itself, the negative economic effects also have the ability to jump from place to place.

The market was clearly aware of this last week, when share prices in tourism sector companies also took a hit. Yet the impact of avian flu can also make itself felt in less obvious places. One famous example is soya beans, which have been falling in price ever since the virus grabbed headlines in Asia. The link is in the food chain - soyabean meal is a major component of poultry feed.

Therefore analysts are having to cast their nets widely in an effort to assess the real economic impact here. This is not helped either by the difficulty in assessing the overall risk - or levels of risk - implicit in different types of outbreak.

At the calmer end of assessment are those who point out that bird flu has long been a feature of the Asian agricultural landscape, which while bad for business and occasionally tragic for individuals has by no means placed any great strain on the economies of China, Vietnam and the like. At the same time, in the UK alone for example, some 12,000 people already die every year from existing strains of flu, without any widespread panic.

While avian flu has a much higher fatality rate than other kinds, optimists also point out that while the deadly H5N1 strain can jump from bird to human, there has not been any passing on of this infection from human to human - the genetic mutation necessary to make that possible not having been made by the virus.

Indeed, optimists tend to worry that the main danger to economic activity could be in the measures taken against the virus - such as tougher conditions on transport of goods between regions and countries - and the panic being caused by fears of infection. The Asian SARS crisis in 2002-2003 caused a virtual halving of growth in China's retail sector, for example, as worried consumers stayed home. The World Bank estimates that the pneumonia-like SARS cost a short-term loss equivalent to about 2% of incomes in East Asia. The disease killed around 800 people.

The Bank has since been concentrating on assessing avian flu and reported back in November 2005 on this very issue.

"One large shadow looms over the generally positive economic outlook [for the world economy] we have sketched out," World Bank economist Homi Kharas told the press when launching his report. "And that is avian flu."

Turkey's poultry business, estimated by the newspaper Hurriyet last week to be worth some TL2.5bn ($1.88bn), could face the kind of long term damage Asian poultry businesses have faced, if the avian flu outbreak is not handled well - and speedily.

Regrettably, however, there has been growing concern over just how competently the crisis is being handled. The first death was originally presented as pneumonia related, rather than a case of avian flu. Since then, there has been a growing clamour in the Turkish media and amongst sections of the public for a better-organised response.

In particular, the outbreak in the impoverished east of the country has demonstrated a number of ways in which social issues can impede a health campaign. Large rural families often give the task of handling poultry to the children, explaining why so far they have borne the brunt of the virus. Levels of poverty and underdevelopment also mean families living in close proximity with their animals, while a lack of education - and indeed illiteracy - hampers the effort to check the spread of the virus.

At the same time, farmers have long been encouraged by subsidies to invest in livestock farming, a policy designed to match up Turkey with EU and world market agricultural requirements. It is also the result too in some cases of a deterioration of the soil due to badly thought out farming methods, leaving grazing the only real option. This has made farmers more dependent than ever on their animals, leading to poor small holders often hiding their poultry from health workers, or worse still, transferring them out of the affected areas to "safety".

The hope is that the lessons from all this will be learned quickly and the virus contained. Yet with cases of infected birds reported in Istanbul by January 9, this worrisome sickness may be making headlines still for some time to come.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Turkey

After a landmark 2021, what does this year hold for ESG-focused sukuk?

Earlier this month Saudi Arabia’s Riyad Bank closed a $750m “sustainability” sukuk (Islamic bond), the latest in a wave of high-profile issuance across different regions. ESG-related...


Exploring the future of sustainable aquaculture in emerging markets

With per capita fish consumption having doubled in the past six decades, aquaculture is becoming more important in combatting food insecurity. Recent innovations seek to improve sustainability and...