Mexico flu outbreak to hurt already weak economy

By Michael O'Boyle - Analysis

MEXICO CITY (Reuters) - A deadly flu outbreak in Mexico will deal another blow to an already bruised economy as fear of infection scares away foreign tourists and keeps nervous Mexicans indoors with their purses shut.

The global economic slump is already pushing Mexico's economy into its worst recession since a devastating mid-1990s financial crisis, as the sharp downturn in the United States, Mexico's chief trading partner, whacks demand for exports.

Now the flu outbreak, which has killed up to 149 people in Mexico and afflicted dozens in the United States, Canada and Europe, could drive the country into an even deeper funk.

Economists say the epidemic looks like it could shave another half percentage point of growth off an economy already set to shrink more than 3 percent this year.

It could have an even bigger impact on gross domestic product (GDP) if the crisis widens and countries issue outright travel bans to Mexico or block trade.

"The economy is in serious peril already. This will add to that drop," said Eugenio Aleman, an economist at Wells Fargo, who sees the outbreak knocking an extra 0.6 percent off GDP this year, adding up to a contraction of 4.5 percent.

The flu outbreak snowballed over the weekend into one of the biggest global health scares in years just as Mexico's government has its hands full fighting the recession and a high-stakes war on drug cartels.

The health minister warned on Monday that the number of flu cases could rise further.