Mexico says flu outbreak to dent 2009 growth

By Luis Rojas Mena

MEXICO CITY (Reuters) - The flu outbreak in Mexico could knock up to half a percentage point off the country's economic growth this year, the government said as it promised tax relief and emergency financing to affected companies.

"It's having a big impact on our economy," Finance Minister Agustin Carstens said on Tuesday.

Mexico was already in recession due to a collapse in U.S.-bound exports. Now its tourism industry is being savaged by the flu epidemic which has killed at least 26 people in Mexico and two in the United States.

Also, in a temporary hit on economic activity, Mexico shut down factories, offices and restaurants for five days beginning May 1, though the government has since said the worst of the H1N1 flu epidemic is past.

Businesses will begin reopening nationwide on Wednesday, but the outlook for the tourism sector, which accounts for roughly 8 percent of the economy, is still unclear.

"Flights were canceled (and) those that are arriving are just picking up people and not bringing new visitors -- especially the foreign flights," Carstens told Mexican radio.

Speaking earlier at a news conference, Carstens said the government will offer measures such as tax relief to affected companies, costing the country a total of 17.4 billion pesos ($1.3 billion), as well as more than 10 billion pesos in emergency financing from Mexican development banks.

Those measures include a cut in airport taxes paid by airlines in an effort to boost tourism, he later said.