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News Article

Mexican GDP Per Capita Expected to Recover by 2026

By Sofía Hanna | Tue, 04/27/2021 - 18:06

Some public policies and the repercussions of the pandemic on the Mexican economy are raising concerns among analysts about how and when will the country recover. Carlos Serrano, Chief Economist at BBVA Mexico, mentions that several economic areas may not recover until 2026.

 

After the initial hit COVID-19 laid on Mexico, recovery has been better than expected and the country could return to its pre-pandemic growth range by late 2022 or early 2023. However, GDP per capita will not recover until 2026, said Serrano to Forbes Mexico. In 2021, GDP is expected to grow by 4.7 percent, which is “better than we expected. It is largely caused by a greater boost from the US in vaccines, but we must be cautious; we are still talking about an incomplete recovery. Unlike the US, which this year will reach the GDP it had before the pandemic, Mexico is still not going to achieve this.”

Income per person will take longer to rebuild because Mexico had a greater contraction during 2020 than other developed nations. Another factor to take into account is the projected increase in inequality in the country, “The crisis may cause an increase in inequality. Those who kept their jobs increased their savings rate and will be in a better position. But those who lost them or went to a more precarious job will be in a worse situation and that will increase inequality in the country. Policies should be applied to reduce the inequality caused by this crisis,” said Serrano.

Lastly, investment continues to be an issue that could represent a long-term problem. A previous MBN article mentioned that the BofA Securities survey showed that 40 percent of participants were concerned about the investment that will come to Mexico due to the local government’s decisions. Afterward, INEGI reported that gross fixed investment in the country sank 18.2 percent last year, the largest drop in 24 years according to Informador. The Business Coordinating Council (CCE) states that the energy policy promoted by the federal government threatens to generate economic, social and ecological damage, reports Expansión. This set of initiatives and reforms have begun to drive away investment. That reform was linked to a 75 percent collapse in private investment and slowed down the transition of the energy sector, reports Expansión. As Serrano mentioned, “The country will have a lower potential growth rate, first due to the damages of the pandemic and second due to the behavior of investors. There is nothing to suggest that (the country) will increase in productivity. Lower investment means lower levels of capital and if investors perceive that the rules of the game change, investment will fall”. 

The data used in this article was sourced from:  
Forbes, MBN, Expansión, El Informador
Photo by:   Edwin Hooper, Unsplash
Sofía Hanna Sofía Hanna Junior Journalist and Industry Analyst