A Difficult First Year From an Economic Standpoint

INEGI’s results on annual GDP growth are out. Though expected, a contraction of 0.1 percent compared to 2018 is still sore news. This is the first negative annual growth rate registered since the crisis of 2009 when GDP fell by 5.3 percent. Compared to 3Q19, GDP remained flat although compared to 4Q19, GDP fell 0.3 percent.

Tertiary activities (services) where the sole winners in 2019. In 4Q19, GDP related to these activities rose 0.3 percent compared to 3Q19 and 0.1 percent compared to 4Q18. However, secondary activities (industrial processes) took the worst hit with a contraction of 1 percent compared to 3Q19 and 1.5 percent compared to 4Q18, according to INEGI. Primary activities had mixed results with a contraction of 0.9 percent compared to the previous quarter and a 1.9 percent increase against 4Q18.

Economic and political uncertainty were the main reasons behind the negative GDP growth, particularly in industrial activity. Investors from various sectors were cautions, which led to a general drop in FDI attraction. According to the Ministry of Economy, between January and September 2019, FDI accounted for US$26.05 billion, which represented a drop of 3 percent compared to the same period in 2018. The good news is that USMCA’s ratification brings a ray of hope for the national economy. According to IMF, the country is expected to reach growth of 1 percent in 2020 as a result of an implemented new deal and improved monetary policy.

While the private sector worries about lacking economic growth, President López Obrador says he does not care much about it as there is well-being in the country. During his morning press conference, López Obrador said economic contraction was already expected and that his data reflected well-being across the country. “It is very important to have better income distribution and for benefits to reach all. That is what keeps me calm, because there is more purchasing power; there is no consumption crisis. I Care much about family economy,” he said.