Mexican Economy to Grow 5 Percent in 2021: Deloitte

Deloitte raised its expectations for Mexico’s economic growth during 2021 from 4 percent to 5 percent, indicated the company in its Economic Insights report. The economic recovery will be mostly driven by export-driven industries, including automotive, electronics and other industrial goods. "Export-related sectors, such as manufacturing and agriculture, have performed better and many of them have already exceeded their pre-pandemic levels," writes Daniel Zaga, Economic Analysis leader at Deloitte Mexico.

The report says that despite the economic rebound, the Mexican economy remains 5 percent below its 2019 levels. During 3Q2020, the country began a recovery that soon halted by the second wave of COVID-19 infections. But now, vaccination efforts are moving forward. By June 23, over 29 million Mexicans had received at least one dose of a COVID-19 vaccine, reports Our World in Data. Vaccination efforts are leading to an increase in mobility and consumption.

The economic recovery will vary from sector to sector. "While the positive trend of export-oriented and consumer industries is a move in the right direction, the steep decline in other industries, such as leisure and hospitality, will remain a challenge," writes Zaga. Industries such as machinery and transportation equipment remain 5 percent below their pre-pandemic levels, while sectors such as computer, mining, agricultural and food manufacturing equipment have already surpassed pre-pandemic levels.

Exports have supported Mexico's economy given the dynamic recovery of the US economy. According to Deloitte, Mexico's trade balance saw a surplus of US$26.6 billion, or 2.4 percent of GDP, in 2020, its highest level recorded. In March 2021 alone, exports grew 31 percent year-on-year. That being said, the automotive sector has suffered chip and gas shortages. "Despite this strong performance, exports of automobiles and other transportation equipment contracted 5.2 percent. The automotive industry, one of Mexico’s most important manufacturing sectors, has also been impacted by the disruptions in the global supply chain of semiconductors," Zaga writes.

Foreign Direct Investment Grows

During the past weeks, MBN documented new automotive investments in the Bajio area, including Aguascalientes and Guanajuato. Figures from Mexico’s Ministry of Economy back this trend. FDI on vehicle and auto part manufacturing during 1Q2020 was about US$1.32 billion. During 1Q2021, FDI in those sectors amounted to US$1.7 billion, a 29 percent increase.

On accumulated figures, over US$80.3 billion have been invested in the automotive sector since 1999, which accounts for the 13 percent of total FDI in the country. Out of the total FDI invested since then, Chihuahua has received 15.3 percent, Coahuila received 10.5 percent, Nuevo Leon 9.2 percent, State of Mexico 8.9 percent and Guanajuato 8.9percent. More than half of the total FDI in the automotive industry has been directed at auto part manufacturing.