Mexico City’s 2022 Economic Recovery
The emergence of the COVID-19 pandemic disrupted global economic activity, cross-border mobility, investment projects, the public and private healthcare systems, and the lives of millions of people. The virus paralyzed economic growth and shook the structural foundations of the world economy, with a greater effect on those economies based on services and dependent on international trade.
During 2022, thanks to a higher vaccination rate, a decrease in hospitalizations and deaths, and the reopening of all economic activities, the aggregate demand for goods and services began to recover. However, its quick expansion has not been fully met by supply, in part due to the interruption of global production and distribution chains. Bottlenecks in manufacturing and logistics persist, unleashing a general rise in prices of most raw materials and consumer goods worldwide. In addition, trade tensions between the US and China, the shortage of semiconductors, the armed conflict in Europe, high energy prices, and the increasingly destructive effects of climate change are also inflationary pressures. As a response, central banks in most countries continue to raise interest rates, thus compromising economic growth.
Yet, in this context, the Mexican economy proved resilient. The Gross Domestic Product (GDP) of Mexico grew 4.3% annually in the third quarter of 2022, according to updated data from the National Institute of Statistics and Geography (INEGI). Moreover, the Mexican peso has accumulated an appreciation of 5.7% against the US dollar, according to the Central Bank of Mexico. The peso has remained among the only four currencies in the world that maintained gains against the dollar, and it is playing between first and second place on the board of winning currencies, along with the Brazilian real. Both the economy and the peso have been favored by solid macroeconomic fundamentals, such as a prudent monetary policy, an independent central bank, a responsible fiscal balance, a balanced current account, a stable and capitalized financial system, and a sufficient level of international reserves. These indicators reflect a sustained recovery of the economy and reduce the chance of a recession in 2023.
For Mexico City, 2022 was the year of the post-pandemic economic recovery. The National Statistical Directory of Economic Units (DENUE) reports a positive balance in the number of economic units between 2020 and 2022, with a surplus of 3,956 new businesses, mainly in the tertiary sector. In addition, the city’s Electronic System of Notices and Permits for Commercial Establishments (SIAPEM) has registered 21,560 new openings of low-impact commercial establishments, such as restaurants, cafes, retail stores, grocery stores, and beauty shops, among others. This is the highest figure on record.
In terms of jobs, Mexico City has been the leading state in job creation for five consecutive months. The Mexican Social Security Institute (IMSS) reported for November an increase of 14,007 new jobs, reaching a total of 3,441,069 formal jobs. Compared to the figure reported for the same month in 2021, the capital has 92,499 additional jobs. As for the unemployment rate reported by INEGI's National Occupation and Employment Survey, it shows a notable improvement from 7.3% in the first half of 2021 to 5.4% by the end of 2022. Likewise, the SIAPEM reports for 2022 the creation of 215,000 jobs derived from the opening of low-impact commercial establishments, that is 77,960 more jobs than in 2020. If these trends continue, by the first quarter of 2023, Mexico City will have recovered and surpassed the formal jobs registered prior to the pandemic.
Mexico City also recovered and strengthened its relationship with the global economy. During the first half of 2022, according to the federal Ministry of Economy, the foreign direct investment captured by the capital city amounted to US$10.3 billion, compared to the US$4.1 billion captured during the same period in 2021; in other words, an increase of 151%. This represents the largest investment attraction on record. Likewise, exports for the second quarter of 2022 reached arecord US$857 million, representing a 30% increase for the same quarter in 2021. This is the highest export growth for a single quarter in more than a decade.
In order to close the inequality gaps between companies and increase their life expectancy as entities that consistently generate employment and household income, the government of Mexico City offers training and networking to support SMEs. The Ministry of Economic Development (SEDECO) Investment Promotion Center and the Social Development Fund (FONDESO) provide free courses to business owners on marketing, foreign trade, investment incentives, brand registration, business models, administration, finance, accounting, commercialization, and logistics, among many others. In four years, more than 320 business courses have been taught to more than 400,000 people.
Certainly, the economic recovery is noticeable in terms of employment, companies, production value, exports and investment. Hence, SEDECO estimates an economic growth for Mexico City in 2022 above the national average, between 2.8% and 3.5% of GDP compared to 2021.