Recession Forecasts Worsen, Pensions ReconsideredBy Peter Appleby | Thu, 06/25/2020 - 18:00
The newsreel sounds like a broken record, but the impact of COVID-19 simply cannot be avoided. The International Monetary Fund has raised its recession prediction for Mexico, as well as other region countries, while Banorte sees a worsening outlook, too. Meanwhile, CCE is set to publish its own reform proposal for Mexico’s Afore system as the peso continues its fight.
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The Minister of Finance Arturo Herrera announced that a proposal from CCE to reform Mexico’s pension system is “90 percent” complete and will soon be published. The Afore system has faced criticism from several sides, including the administration, and though opinions differ on the way to improve it, there is a general consensus that it must be fixed. At the moment, the system in place does not provide sufficient security for workers following their retirement.
This week, two major institutions revisited their forecasts for Mexico during 2020. The IMF now predicts Mexico’s economy will contract by 10.5 percent, while Banorte suggests a 9.8 percent drop in GDP. If these predictions hold true, Mexico will be passing through a heavier economic slump than the one witnessed during the Great Depression.
Following a drop in value, the peso has been working its way back up against the dollar. On Thursday, the peso saw a small drop again hitting MX$22.76 per dollar. The COVID-19 pandemic has clearly made conditions harder for the currency after manufacturing closed nationwide. Time will tell what difference USMCA will make when it comes into effect on July 1.