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Flu season is becoming the latest headwind for the Canadian economy, which has already been hit by a strong dollar and tepid demand.

The H1N1 flu means up to 8 million more Canadians could fall ill, the Winnipeg-based International Centre for Infectious Disease estimates, with absenteeism posing a threat to productivity just as the economy is struggling out of recession.

Canadian businesses are being urged to plan for absenteeism rates of up to a third of their work forces in coming months. Other potential wrinkles relating to the virus include a more distracted work force, cautious retail spending and reduced tourism and transportation activity, economists said.

If the virus becomes widespread, “it will throw sand in the gears of business activity and that will reduce productivity in the near term,” said Sal Guatieri, senior economist at BMO Nesbitt Burns Inc. “It adds to the uncertainty about the economic outlook.”

Estimates range on the cost a pandemic carries. The World Bank pegs the potential hit at 0.7 per cent to 4.8 per cent of global gross domestic product, depending on severity. Bank of Montreal has calculated a mild pandemic would cut annual economic growth by 2 percentage points while a severe outbreak would reduce growth by 6 percentage points from where it would otherwise be.

BMO says the mass innoculations will make a difference.

In Germany, a study last week by the insurer Allianz predicted the flu could cost up to €40-billion, or between 0.4 and 1.6 per cent of GDP, depending on the severity.

It's too early to estimate costs for Canadian businesses. But they could easily outstrip the $2-billion pricetag of the SARS outbreak in 2003, said Amin Mawani, director of Schulich School of Business's health industry management program.

“It will be significantly greater than SARS,” he said. “That was largely a hospital-based illness. This is community based and national.”

Absenteeism poses a key challenge, particularly among small businesses with more limited resources.

Flu season already means more people call in sick. This year, depending on the rates at which people get vaccinated, an additional 3 million to 8 million Canadians could get sick, “so that's really going to affect businesses,” said Wendy Schettler, director of public health programs at the International Centre for Infectious Diseases.

Many businesses she speaks with aren't unduly worried because they can handle a week of high absenteeism.

The problem, though, is that some may face absenteeism rates of 25 to 30 per cent over an extended period. “It ebbs and flows,” she says. “It's not just a week. It's weeks and potentially months.”

A recent business survey suggests pandemic planning is still not a top priority. Just 22 per cent of respondents to an Ontario Chamber of Commerce survey last month have an emergency plan in place and another 27 per cent say they're developing one. The results aren't much different from a similar survey the chamber conducted in 2005.

Not everyone is pushing the panic button. Toronto-Dominion Bank hasn't factored the impact of H1N1 into its forecasts, said Beata Caranci, the bank's director of economic forecasting.

“We didn't make any allowances for the drag on GDP,” she said, because the public and companies are more prepared than they were during SARS. If there is any impact, it will likely be only during one quarter.

The most vulnerable sectors are travel, restaurants, conferences, hotels and retail, she said.