Foreign Trade Could Lead to Mexico’s Recovery

Mexico’s economic recovery is expected to come from foreign trade because the manufacturing, commerce and transport sectors remain in the lead in matters of economic recovery, argued BBVA Research. Other industries such as automotive, fintech and tourism are still below their pre-pandemic levels and might not see a recovery until  2024.

Employment will define the recovery of non-exporting entities since limited employment inhibits consumption, argued BBVA Research. The impact of the economic crisis caused by COVID-19 was largely reflected in a great loss of jobs. "We maintain our expectation that manufacturing will have the highest growth during 2021, far surpassing mining, electricity and construction. Therefore, the states with an export manufacturing profile will benefit the most and therefore, those that we estimate will be recovered first due to the network effect that this sector has on other activities and on employment."

BBVA’s study of Mexico’s regional situation of Mexico during its second half of 2021 reveals that the GDP of manufacturing, wholesale trade and transportation are growing at annual rates of 15.2 percent, 13.8 percent and 13.4 percent, respectively. Manufacturing, transportation, wholesale and retail trade might be the first to rebound given their rapid growth. Other sectors, such as accommodation and recreation, are also forecasted to present high growth rates by the end of 2021 but they will continue below their pre-pandemic levels. The automotive industry is stronger during the first half of 2022 thanks to more dynamic exports. Meanwhile, the fintech sector is expected to become stronger thanks to changes in consumption patterns that occurred during the pandemic and might continue growing during 2022. However, tourism is expected to take a longer time to recover: it will grow domestically in the short term but will not see a full recovery until 2024. 

The Mexican Institute of Social Security (IMSS) shows that to date only three states have registered a greater number of workers: Tabasco, Baja California and Michoacan. The rest lost workforce, of which Quintana Roo and Baja California Sur stand out as their main economic sources, tourism and hospitality, were the most affected. Mexico City was the fifth to lose most formal jobs, 4.3 percent of the average of that year compared to 2019. 

Mexico is also confident that the entry into force in July 2020 of the USMCA will help attract investment, boost trade and make the Mexican economy grow above 6 percent this year.