GDP Projection for 2020 is Down

Banco de Mexico (Banxico) lowered its 2020 growth forecast for the Mexican economy from a range of 0.8 to 1.8 percent to between 0.5 to 1.5 percent. This is the fourth consecutive reduction in Banxico's estimates for Mexico’s Gross Domestic Product (GDP) this year after a 0.14 percent contraction in 2019 was confirmed on Tuesday.

Among the reasons behind the reduction, Banxico noted the possible impact from the COVID-19 (coronavirus) outbreak. “Uncertainty related to the effects of the coronavirus on the global economic stands out, especially on global value chains,” the central bank detailed in its quarterly October-December 2019 report.

The estimate for 2021 was also adjusted downward, from a range of 1.3 to 2.3 percent in the previous report, to between 1.1 and 2.1 percent.

This forecast anticipates a more gradual recovery in domestic demand and the ongoing economic global economy weakness. “Expectations for industrial production in the US have been revised down again,” the central bank warned.

Banxico’s Governor Alejandro Díaz de León stressed that global affairs are creating uncertainty. “While some of the risks facing the global economy have been mitigated, such as trade conflicts, others have emerged, such as the coronavirus,” he said.

Global trade and volatility in international financial markets are the main external threats. Among internal threats are the possible downgrade in PEMEX’s rating and Mexico’s sovereign debt.

Following the presentation of the report, Gerardo Esquivel, deputy governor of Banxico, ruled out the possibility that the electoral process in the US might have a negative impact for Mexico.

Despite the negative forecast, the Ministry of Finance and Public Credit (SHCP) is still optimistic about the Mexican economy in 2020, and expects the Mexican economy to grow between 1.5 percent and 2.5 percent by the end of this year.

“We are not depending on what Banxico does,” Arturo Herrera, minister of SHCP said, explaining that investment and growth will be the priority this year. “What worries me is investment and growth. This is where we are working right now,” Herrera said.