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Mexican economy forecast upgraded

Source: Forbes

Experts estimate that this 2021 general inflation will close at 3.88% and the exchange rate, very volatile, will end at $20.32 pesos per dollar.

Experts raised to 3.89% the growth forecast for Mexico for 2021 despite the pandemic uncertainty derived from the pandemic of coronavirus.

And after the collapse of -8.2% of GDP last year, reported Tuesday the Bank of Mexico (Banxico).

According to the Bank's Private Sector Economic Specialist Expectations Survey.

The estimated growth during February is higher than expected in January, when experts consulted by the central bank estimated an increase of 3.74% of the economy for this year.

This is the first forecast of the survey after it was confirmed that Mexico' s economy contracted 8.2% in 2020, its worst slump since the Great Depression of 1932, as reported by the National Institute of Statistics and Geography (Inegi) last week.

Despite the Covid-19 pandemic, the experts felt that, on a general level, the main factors that could hinder economic growth are:

Domestic economic conditions (47 per cent), governance (33 per cent) and public finances (10 per cent).

In particular, the main factors were:

  • The weakness of the domestic market (23% of responses).
  • Domestic political uncertainty (19%).
  • The uncertainty of the domestic economic situation (18%).
  • Public expenditure policy (8%) and
  • Problems of lack of rule of law (7%).

In addition, analysts estimate that this 2021 general inflation will close at 3.88% and the peso exchange rate, very volatile, will end at $20.32 pesos per dollar.

A month ago, the same experts placed inflation in 2021 at 3.65% and the exchange rate at 20.18 units per greenback.

PROGNOSIS OF UNCERTAIN RECOVERY

The projection of Banxico's survey compares with the 3.7% growth forecast by the World Bank and 4.3% estimated by the International Monetary Fund (IMF).

The Ministry of Finance and Public Credit (SHCP), which estimated a decrease of 8% in 2020, estimates a rebound of 4.6% of GDP in 2021.

The 34 groups of analysis and economic consultancy of the domestic and foreign private sector consulted by the Bank of Mexico worsened their forecast for the first quarter of the year.

When they foresee an annual contraction of 4.46% of GDP and a quarterly fall of 0.73%.

Edmar Ariel Lezama, coordinator of the Unique Program of Specializations in Economics at the National Autonomous University of Mexico (UNAM), agreed.

"This first quarter of 2021 will also be bad, maybe not with a negative figure".

"But it is very close to zero, and this goal that has been set for 2021 of growing between 3% and 5% may become complicated," the professor explained to Efe.

In addition, of the 12 million people who dropped out of the economically active population (EAP) in April 2020.

Almost 3 million have yet to be reincorporated, the academic said, citing Inegi.

"Around the quantity of jobs we have not recovered and it will not be soon, and around the quality it will also hardly happen in the short term," he lamented.

Given this scenario, the full economic recovery in Mexico could take until 2024, said Hector Magaña, professor at the Tec de Monterrey Business School.

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