Mexico’s GDP Grows, Remittances ChangeBy Sofía Hanna | Thu, 06/24/2021 - 11:11
This week Cristian Huertas, Country Manager at Bnext, forecasts future changes in remittances and the consequences this could cause. INEGI released its “Occupation and Employment Indicators” report, showing the improvements made this year in comparison to 2020. Finally, Citibanamex announced that Mexico’s GDP is expected to grow due to several factors, such as the economic recovery in the US.
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- Cristian Huertas, Country Manager at Bnext and an MBN Expert Contributor, forecasted that remittance disruption is its way. Remittances are a vast source of revenue for Mexico’s low-income families, indicated Huertas. Although the average remittance is of about US$300, digging into the data sheds light on the fact that the vast majority of transactions are just over US$100. Also, the average cost charged by traditional remittance companies can be over US$10 in many cases. A wave of fintech players are launching more competitive offers to solve this problem. The new era of remittances comes with the adoption of blockchains that facilitate the flow of funds internationally at a very low cost and in a more compliant way. The embracing of blockchain technology is a consequence of its technical virtues and the massive global surge of cryptocurrencies. This change will also come with consequences such as threats to incumbents, more resources for Mexican families and a new wave of financial products.
- INEGI published its "Occupation and Employment Indicators" for May 2021. The report informs that 57.2 million people aged 15 and over are economically active, which represents a participation rate of 58.7 percent. Compared to May 2020, the unemployed population grew by 388,000 while the unemployment rate decreased by 0.2 percentage points. Compared to the previous month, May’s unemployment rate decreased by 0.4 percentage points, reaching 4.1 percent.
- Citibanamex estimated higher GDP growth and inflation due to the accelerated recovery in the US and the normalization of activity in Mexico. GDP growth in 2021, previously estimated to be 5.1 percent, was increased to 5.9 percent. Even with this increase, inflationary pressures have been stronger than expected, repots the bank. For that reason, inflation is expected to climb to to 5.6 percent and 3.7 percent by the end of 2021 and 2022, respectively.
- Banxico released its Financial Stability Report for June 2021, which mentions that global economic activity continued recovering in 1Q2021. The report also discusses the effects of the pandemic on employment levels and household income and highlights that households with lower income, few savings or dependence on the sectors and companies most affected are the most vulnerable. At the end of 1Q2021, the balance of total financing received by households contracted in real annual terms.