The outbreak of swine flu has already pressured Mexico's peso lower and will hurt the country's gross domestic product (GDP), bank analysts said on Tuesday.
The peso traded as strong as 13.08 per U.S. dollar on Friday, but on Monday, it once tumbled at 14.07 per dollar, a near eight-percent fall, after the government raised the official death toll caused by the outbreak to 152.
On Tuesday, the peso traded at around 13.85 dollars, a drop of around 5.5 percent from its strongest point on Friday.
"If the flu is a short term effect, then I think the peso move is already priced in," said Gabriel Cassillas, a financial analyst at Banco UBS in Mexico City. "But if there is more bad news it could weaken to a range of 15.0 to 15.50 to the dollar."
His bank estimates that 10 days of anti-flu measures could shave 0.2 points off 2009's GDP, but an extended period of 15 days to a month could take 0.8 points to one point from Mexico's economy.
Meanwhile, the outbreak is affecting Mexico City much more than the rest of the nation. The capital has a greater weight in the nation's economy.
"Service industries including tourism and transport will be the worst hit and they represent 66 percent of the economy," said Casillas.
On Tuesday, Mexico City's Mayor Marcelo Ebrard delivered a blow to the city's service sector due to the swine flu outbreak, ordering the closure of cabarets, ballrooms, cinemas, theatres, gymnasiums and swimming pools.
Restaurants are allowed to remain open, but can only serve takeaways. Educational institutions from nurseries to universities throughout the country were ordered to close on Monday, forcing many parents to stay at home rather than work.
"We are reducing our growth forecasts due to this situation," said an analyst at stock exchange house Actinver. However, he argued that the effect would be relatively short-lived.
On Tuesday, city officials said that 320 residents have the deadly new A/H1N1 strain of swine flu virus, down from 326 on Monday and 351 on Sunday.
The flu killed three people on Monday, down from five it killed one day earlier.
The Actinver analyst also believes that there will soon be some signs of a bounce before the end of the first half year.
"The weakest results will be from January to April. May and June will be less weak," said the analyst, citing government measures taken to buttress economic stability as providing a strong counterweight to the swine flu shock.
Meanwhile, the International Monetary Fund agreed to lend Mexico 47 billion dollars and the U.S. central bank has also offered a foreign exchange swap line worth 4 billion dollars which allows Mexico to supply dollars when they are tight.
(Xinhua News Agency April 29, 2009)
