The Day at a Glance | April 17 2020

China records its first economic contraction in decades

The Chinese economy recorded a contraction at an annual rate of (-) 6.8% during 1Q20, period in which the country suffered havoc due to the spread of the new coronavirus. It is the worst piece of data since official GDP figures exist, published for the first time in 1992; and it is impossible to find worse figures regarding a contraction in the economy`s performance unless one goes back to the 1970`s. Retail sales contracted (-) 15.8% in March and industrial production shrunk only (-) 1.1%, which points out that the worst was seen in the first two months of the year. Investment fell (-) 16.1% in the first three months of the year. Estimates suggest that the Chinese economy has returned to operating at 90% of its capacity, even though it`s expected to see a slow recovery due to lockdowns in other economies (an obstruction for external demand) and slow progress concerning domestic consumption. Joblessness figures were positive, with a decrease in the rate of unemployment to 5.9% (vs 6.2% prev.). The recovery of the world`s second largest economy in the second quarter of 2020 will largely depend on its internal market`s recovery and on the fiscal and monetary stimuli put into effect during the epidemic.

Mexico`s Central Bank rejects government`s proposal of an advance on money it makes from the depreciation of the peso

In a statement published by the central bank, the entity confirmed a meeting took place between the bank`s Governor, Alejandro Díaz de León and Mexican President Andrés Manuel López Obrador, and discussed the country`s economic situation, the measures to counter the virus`s negative effects, as well as the procedures and times concerning the central bank`s remnants. It`s believed that the President had a meeting with the Governor in order to look for a way to advance the transfer of remnants obtained from the central bank`s foreign exchange operations, in midst of the need to obtain resources to confront the current health and economic crises. According to Mexico`s Central Bank`s Law, the transfer of resources must be carried out in April of next year (once the 2020 fiscal year has concluded) and the Governor requested the times and process of its law to be respected. These resources are a potential source of revenue for the Government, which is trying to address issues with its fiscal position as it needs to increase spending due to the emergency. López Obrador had asked for an advanced payment, which was denied by the central bank. Obrador assured after the meeting, that the cordial discussions with Dìaz reiterated his respect regarding the central bank`s independence. In 2017, Mexico`s central bank delivered a remnant totaling $321,653 million pesos (1.5% of GDP) to the Federal Government, which helped record a primary surplus in said year. According to the Federal Law on Budget and Treasury Responsibility, 70% of resources must be used for the payment of debt or the reduction of the amount of funding required by the federation; the remaining 30% must be allocated towards the Stabilization Fund or assets that strengthen the country`s fiscal position.

Trump presents a plan to reactivate the US economy

President of the United States, Donald Trump presented guidelines for the economy`s recovery beginning in the month of May, given the fact that new recorded cases of COVID-19 in the country have slowed down. The plan outlines three phases and seeks to ease restrictions placed on certain regions of the country that have low rates of virus transmission. The President estimates that up to 29 states could ease restrictions in the next month, even though the decision must be made by each state`s governor, Trump said. The eligibility criteria for easing restrictions considers two weeks of decreasing numbers of suspected COVID-19 cases, as well as the implementation of a robust testing program. The different phases consider easing restrictions must be carried out gradually, with school activities scheduled to resume in phase 2, and letting people go back to work without any restrictions in phase 3. Protecting vulnerable groups will be maintained during the first two phases; during the third phase, these groups will be recommended to maintain social distancing in public places. Lastly, mass events will be able to resume with moderate distancing until phase 2. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases in the US assured there could be a resurgence of contagions, which would only set back progress made during the easing of restrictions.

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