According to INEGI, during 1Q20 the Mexican economy experienced a 1.2 percent fall in a non-seasonal rate and a 2.2 decrease in seasonally adjusted terms compared to the same period of 2019. Despite the fall in the country’s economic activity, in late April INEGI estimated that for the first quarter, the Mexican economy would experience a 1.6 percent fall in a non-seasonal rate. Even though the contraction was not as steep as it was expected, it is the worst performance the Mexican economy has had since 2009. Moreover, the country had yet to experience the full extent of the COVID-19 pandemic.
Manufacturing activities were the ones that experienced the hardest fall with a 3.5 percent contraction against the same period in 2019. Tertiary activities also experienced a contraction but only of 1.2 percent. Only primary activities experienced growth, accounting to a 1.1 percent increase.
Within secondary activities, it was construction that took the heaviest blow, with a 8.2 percent decrease against the same period in 2019. Construction has been throughout the year the most punished industry, experiencing negative performance throughout 2019. Manufacturing activities also experienced a 2.9 percent decrease in the year’s first quarter.
Though tertiary activities also experienced a decrease, including the wholesale segment; transport, warehousing and mailing; financial services and insurances; professional, scientific and technical services and educational services, the segments that experienced the steepest contraction were cultural, leisure and sports services with a 14.1 percent fall and services of temporary accommodations and food and beverages preparation, with a 7.9 percent fall.
In March 2020, overall economic activity also experienced a decrease, with a 2.6 percent annual contraction. The IGAE, which measures overall economic activity, shows that March 2020 has been the month with the worst economic contraction since October 2009. With the March report, the Mexican economy has experienced 11 months in a row of economic contraction.
Experts believe that once numbers for the second quarter are out, the contraction will be even steeper. Yesterday, Bank of America (BofA) announced it expects the Mexican economy to contract 10 percent in 2020 and that 2Q20 the country’s GDP will experience a 40 percent contraction against 1Q20. BofA expects that Mexico will have a large U-shaped economic recovery and that by the end of 2021, the country’s GDP will still be lower than in 2019. The economic crisis will destroy around 1 million formal jobs in the country. According to BofA, the fiscal and monetary policies that have been undertaken in the country are not helping to accelerate economic recovery.