Mexico expects greater drop in GDP, made worse by flu

Mexico expects greater drop in GDP, made worse by flu Mexico City - Mexico's central bank said Wednesday that it expects GDP to contract by 3.8 to 4.8 per cent in 2009, a considerably more pessimistic impact than its previous forecasts that could get worse in the light of the current flu outbreak.

The Bank of Mexico had estimated earlier this year that GDP would fall by 0.8 to 1.8 per cent.

Beyond the severe global financial and economic crisis, the bank said the flu epidemic is an "additional" risk factor that could affect "all levels of productive activity" in the second quarter of the year.

"Given how recent this event (the flu) is, it is not possible to know how long it will last and how intense it will be, so we can also not predict what effects it will have on variables like inflation, growth and the exchange rate," the bank's statement said.

"The predictions and projections that are presented in this report do not take such a situation into consideration."

Moreover, the bank revised its inflation forecast upwards, to estimate it at 4.0 to 4.5 per cent in 2009.

Some 350,000 to 450,000 formal jobs were expected to be lost this year in the world's 13th-largest economy, even without the flu. To make matters worse, the virus - which has left 159 dead in Mexico, at least seven of them of swine flu - has led to a ban on eat-in restaurants, to the cancellation of mass events, and other drastic measures.

"The recent evolution of productive activity in Mexico would seem to be responding mainly to global factors," the report said. (dpa)

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