GDP Could Reach 1.6 Percent in 2Q2021: Banorte

Mexico’s GDP could grow by 1.6 percent quarter-over-quarter during 2Q2021 due to greater dynamism and the reopening of many economic activities, according to Banorte. In its weekly report, Banorte indicates that the country could see 19.8 percent growth year-over-year thanks to the improvement in epidemiological conditions in the first half of the period and the boost in services. 

Banorte’s forecast is influenced “by a very favorable base effect, recalling the strong contractions in April-May due to lockdowns, as well as a faltering reactivation in June as part of the reopening. Additionally, there is a marginal boost due to the associated calendar effect of Easter.” Banorte also forecasts a surplus of US$2.005 billion in Mexico’s trade balance, which will probably continue to rise as some non-essential activities begin to resume both locally and abroad. However, the report forecasts a deficit of US$1.650 billion in the oil balance, moderating at the margin despite an upward extension in prices. In the non-oil balance, Banorte expects a surplus of US$3.656 billion, while exports would grow 21.0 percent year-over-year and imports by 34.7 percent, with shipments from the automotive sector likely to fall sequentially.

The country’s unemployment rate is expected to increase despite its contraction the previous month, which might have been caused by seasonal fluctuation caused by the Easter and summer vacations. The unemployment rate is expected to increase from 4.14 percent to 4.29 percent. “As a result, we continue to see increases in the labor force – as suggested by the relatively low levels of participation rate –, although some of these people are still having difficulties finding a job. This would be very relevant in a more complex context around the epidemiological conditions –as the cases rose quite quickly in the last part of the month– which could compromise the recovery, especially in sectors with high social interaction.”

Economic activity also increased slightly to 23.2 percent year-over-year, over the previous 22.3 percent. Banorte forecasts an improvement in epidemiological conditions during the coming months, especially in the service sector. However, the bank also considers a more adverse scenario for the industry and warns that the manufacturing sector could be hurt by the lack of key inputs.