Mexico’s GDP to Grow in 2021 but Challenges Remain

The end of 2020 might bring good news but also challenges. COVID-19 dealt a significant blow to Latin American economies as numerous countries in the region saw a contraction in their GDP. Argentina’s GDP contracted by 10.5 percent, Peru’s by 11 percent, Venezuela’s an astonishing 30 percent and Mexico’s a historic 9 percent, explains the Economic Commission for Latina America and the Caribbean (ECLAC), as reported by El Economista. Alicia Bárcena, Executive Secretary of ECLAC, estimated a regional decrease of 7.7 percent, reports Forbes Mexico. Economies in Latin America have been the most affected by the health crisis due to the vulnerability of the region’s health systems and their low investments in science and technology, explained Bárcena to El Economista. The region’s GDP, she added, will pick up during 2021 as a result of the statistical effect of comparing against the quarters of the previous year but this does not mean a full recovery to pre-pandemic levels.

In 2021, Mexico’s GDP will register an increase of 3.8 percent, estimate experts from ECLAC. This rate is positive but does not overcome the historic 9 percent decrease seen in 2020. Bárcena highlighted that the variables that may affect economies positively or negatively include COVID-19 vaccination programs in Latin American countries, as well as the magnitude of further spikes of the disease. Mexico announced recently its vaccination plan, of which you can read more on MBN. Logistics and distribution have been assigned to the armed forces and public healthcare institutions. Mexico’s plan is ambitious as it hopes to finish vaccinating its entire population by late 2021 or early 2022 although some question its viability.

Bárcena stated that the economic rebound of Latin American countries depends on the continuation of monetary and fiscal policies. “An early removal of stimuli could flunk recovery,” she commented. Because of that, Alejandro Saldaña, Chief Economist of the Financing Group BX+, mentions that measures taken by the Mexican government have to guarantee certainty, credibility and trust in institutions. He told Expansion that Mexico also has to “reach a balance between financial stability and support for homes and business that were the most affected by, for example, reorienting expenditure toward profitable projects or giving development banking a more active role.” Responses need to be accurate if countries want to climb out of these slumps. Saldaña warned that Biden’s victory in the US could result in measures that affect Mexican exports, as well as a decrease in American economic growth, which could affect Mexico’s economy as well.