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News Article

Mexican Economy Reaches Historic Minimums

By Gabriela Mastache | Mon, 06/01/2020 - 11:47

According to specialists polled by Banxico in May 2020, in 2020 the economy will probably experience an 8.16 percent contraction, up from the 7.27 percent contraction that was expected in April. Though for 2020 the expectations between the April and May polls are fairly similar, in May expectations went down 0.01 percent going down from 2.52 percent growth to 2.51 percent growth.

Moreover, specialists polled by Banxico believe that the economic contraction will extend until 1Q21, and it will be until 2Q21 when the country will finally experience economic growth. Though President López Obrador has said in multiple occasions that by the end of his administration the country would experience 4 percent growth rates, analysts believe that estimation to be very far from reality. Analysts polled by Banxico estimate that during the next 10 years, the country will experience 2 percent annual growth rates.

Economic analysts are not the only ones believing that Mexico’s economic performance will be less than stellar. According to INEGI, business owners in Mexico have experienced a historic loss of confidence in the national economy. During May 2020, the Business Confidence Indicator reached a historic minimum. Business owners in the segments of manufacturing, construction and trade were the ones that reported the lowest numbers. The steepest contraction was registered in the manufacturing sector, were business confidence experienced a 17.7-point contraction. The trade sector experienced a 15.4 percent drop, while the construction sector experienced a 13.6 points contraction.

The construction sector has been heavily hit by the current COVID-19 pandemic. The sector had already been experiencing a crisis and INEGI’s index shows a fall in confidence in the national economy and in investment expectations. INEGI mentions that the main concerns business companies have are related to the value the work they perform as contractors will have once the pandemic is over.

IMEF’s early economic indicators also show minimum historic values as of May 202 regarding manufacturing production, consumption and services. The indicator for manufacturing activities registered a 1.8-point contraction to reach 39.2 points, well below the 50-point line that IMEF establishes as a negative threshold. This is the 13th month in a row where this indicator has experienced a contraction.

Though the non-manufacturing indicator experienced a 2.4-point increase, it still remains at 38 points, meaning it remains in the contraction zone. This indicator has not moved into growing numbers in 14 months. According to IMEF’s report, the performance of these two indicators are a showing sign that the country will experience an economic crisis without precedent in the modern day. “During the first five months of the year, both the IMEF Manufacturing and Non-Manufacturing Indicators have descended to historic minimum levels, which points to a pandemic recession without precedent since these measurements are available. May results reinforce the expectation that this recession will have an adverse impact over employment without precedent.”


The data used in this article was sourced from:  
Banxico, El Economista, IMEF
Photo by:   Pixabay
Gabriela Mastache Gabriela Mastache Senior Journalist and Industry Analyst