IMF Updates Mexico’s GDP Growth Forecast

Despite slow economic growth in June, the International Monetary Fund (IMF) updated Mexico’s economic outlook for 2021 and forecasted a 6.3 percent GDP growth, an increase of 1.3 percentage points from its initial forecast in April. Uniformly, growth projections for 2022 have also improved, jumping from 3 percent to 4.2 percent in just three months. This forecast comes close to the anticipated growth of 6.5 percent forecasted by Gabriel Yorio González, Minister of Finance and Public Credit (SHCP).

The report maintained that overall global economic growth would remain at 6 percent. While headwinds were made by wealthier countries, their advances were offset by contractions in emerging economies that are currently struggling with resurging COVID-19 cases brought on by the more communicable Delta variant. The widening disparity rests mainly on vaccine assess and continued fiscal intervention.

"Close to 40 percent of the population in advanced economies has been fully vaccinated, compared with 11 percent in emerging market economies, and a tiny fraction in low-income developing countries," Gita Gopinath, the IMF's chief economist, said during a news conference.

The IMF proposes addressing this with multilateral action starting with the vital dissemination of vaccines and financial assistance for constrained economies from a US$50 billion fund meant to reinforce national-level policies at pace with a changing crisis.

The US, whose economy only contracted 3.5 percent in 2020, managed to improve its growth forecast for 4Q2021 with a robust vaccine rollout and steady fiscal intervention; which has had a recognized spillover effect in the economies of Mexico and Canada. These combined efforts have boosted IMF’s 2022 global growth forecast by 0.5 percent from April.

Mexico's better-than-expected first quarter results coupled with Brazil’s booming terms of trade are the reason for Latin America’s forecast upgrade. In order to stay on track, these countries will have to anticipate possible disruptions the Delta variant might bring by ramping up vaccination efforts whilst addressing the infodemic that threatens to undo painstaking gains.

India, which has been experiencing a debilitating third wave of coronavirus infections saw a 3-percentage point reduction, the largest scale back in growth forecasting. Meanwhile, due to decreased public investment China has seen its own projection shrink by 0.3 percent.

Overall, the world economy is performing within anticipated projections only with a change in its composition where wealthier economies who have had a robust vaccine rollout and provided fiscal intervention have fared better than emerging economies who lack capital liquidity. Mexico has exceeded expectations with a 1.3 percent increase since June supported by vaccination efforts and export invigoration with is USMCA partners. In order to preserve its momentum, however, the country must focus on increasing vaccination efforts amid a third COVID-19 wave.