The Day at a Glance | May 5 2020

Advanced economies start to plan their reopening

After several weeks of quarantine in Europe and the United States, some confinement measures to stop the virus`s spread have started to loosen. With the worst of the virus left behind, more than four million workers have returned to their jobs in Italy, while Spain has allowed its citizens to leave their homes for the first time in seven weeks. In Germany, some businesses resumed activities last week, even though consumers still act with strong caution; something similar is seen in Texas and Georgia this week, where restaurants and malls have recently resumed activities, but show slow influx of people. In California, Governor Gavin Newsom stated he is sure the epidemic`s peak has been reached, and confinement measures will start to loosen on Friday. Reopening plans in the United States and Europe consider a gradual return to normalcy, which could reach their final phases in July-August. Once the calendar reaches fall, the chances of seeing a second wave of the virus will increase, along with stricter confinement measures; especially if a treatment or a vaccine has still not been discovered. Laurence Boone, Chief Economist for the Organization for Economic Cooperation and Development, stated that the economic recovery will be slow, and the return to normalcy could not be seen until 2021.

The United States will issue $3 trillion dollars in debt in April-June

The US Treasury Department announced it will issue up to $2.99 trillion dollars in debt throughout the next three months yesterday – in order to fund the economic aid in light of the pandemic. Treasury Secretary Steven Mnuchin recognized this is an extraordinary figure, which will double the total amount of debt issued in 2019 ($1.28 trillion) in just a quarter, and is 5 times greater than the maximum amount of debt issued in a three month period (in 2008). For the July-September quarter, the estimated amount of financing requirements is at $677 billion dollars. The Treasury plans to have a new 20-year bond issuance starting in May, and markets are confident there will be enough demand for these US bonds.

Remittances increase 36% annually during March

According to figures published by Mexico`s Central Bank, remittances in March reached an all-time high of $4.02 billion dollars, a 36% increase with respect to the same month of 2019. These figures contrast sharply with economists` estimates (-2.75 billion e.), who expected to see contractions in March due to employment and the US`s economic contraction. It`s estimated that remittances reached an all-time high due to advanced decisions on behalf of Mexicans living in the United States, taking advantage of the peso`s devaluation and plan to return to Mexico in light of the current employment situation in the US, where deportations could increase. Nevertheless, it`s expected that remittances will start to decrease in April, which is in line with what has been observed in past crises, and a considerable fall in remittances is expected to be seen in 2020. The World Bank forecasts a 20% drop regarding the flow of dollars to Mexico in the form of remittances in 2020.