MX$35 Billion Lost in Spending Due to COVID-19By Gabriela Mastache | Thu, 05/07/2020 - 14:09
In a single month, the drop in credit and debit card use represented a 1.7 percent fall of the country’s GDP. According to an analysis performed by Gerardo Esquivel, Deputy Governor of Banxico, and investigator and academic Raymundo Campos, mobility restrictions and the social-distancing measures that the government implemented have resulted in a reduction in consumption and in the use of point of sale terminals.
In a publication called “Niveles y Patrones de consumo en la era del COVID-19” (Levels and Consumption Patterns in the COVID-19 era) Esquivel and Campos argue that at the end 2019, 11 million transactions in points-of-sale terminals took place on a daily basis, out of which the average expenditure accounted to MX$661 (US$27.5). According to this data, during 4Q19, the monthly average expenditure at points-of-sale terminals accounted to MX$215 billion (US$8.96 billion), representing 0.9 percent of the GDP of 2019.
According to Esquivel and Campos, the nature of the sanitary emergency, alongside the measures that have been implemented to contain it, have impacted the demand of tourism and transportation services, alongside other services and sectors that are characterized by a close contact between sellers and buyers. In the article, Esquivel and Campos mention that there has been a decrease in demand and buyers’ behavior since March 14, the day in which social-distancing measures were announced.
Before the quarantine began, nominal expenses in credit card were increasing by 7 percent and in debit card by 15 percent. However, both authors note that after the social-distancing restrictions were announced, expenses in both cards fell immediately. In fact, Esquivel and Campos estimate that in April alone, a total of MX$35 billion (US$1.5 billion) were lost because of expenses not made (MX$22 billion [US$920 million] in credit cards and MX$13 billion [541.6 million] in debt cards). This loss accounts to 1.7 percent of the monthly GDP and 2.6 percent of the private consumption that takes place in an average month.
Though the fall in consumption can be found in all segments, the article notes that the transport, food and tourism segments experienced in April 2020 very significant falls that fluctuate between 77 and 90 percent. The other segment that has also experienced significant falls in the use of credit and debit cards is gas stations, which is registering falls between 77 and 90 percent, as well.
The article notes that despite the grim perspective for the Mexican economy, in the past few days expenses have not fallen, which might mean that April will go down as the month with the worst economic activity of the year. However, both authors say that the economy is not out of the woods yet and that if overall expenses do not recover in May, the economic fall of the current month could be fairly similar to the one of April.