Despite improved fundamentals, Mexico has not escaped the world economic recession. The global manufacturing downturn and the collapse of trade, notably with the United States, have depressed the real sector. Reduced availability of credit has started to bear on activity, although the financial sector has so far weathered the global crisis. Low oil prices are putting pressure on budget revenue, despite a welcome hedging this year. The change of sentiment of international investors towards emerging-market borrowers has led to reduced net capital inflows and a large depreciation of the currency. The outbreak of influenza is likely to also contribute to the downturn. Thus, growth is set to be negative this year and recover only gradually in 2010. The authorities have responded with liquidity measures, lower interest rates, foreign currency interventions and a fiscal stimulus. But there might be room for more policy action.