Mexico’s economy suffered a sharp drop of -8.5 percent, the worst since 1932. The critical question is: should we be worried?
MEXICO CITY (Times Media Mexico/INEGI) – Mexico’s economy suffered a sharp drop of -8.5 percent, the worst since 1932. According to preliminary data published on Friday, January 29, 2021, by the National Institute of Statistics and Geography (Inegi), which are in line with those projected by international organizations such as the International Monetary Fund (IMF). During the Great Depression, Mexico’s Gross Domestic Product (GDP) plummeted by a -14 percent, causing the country to go bankrupt.
The reason for that crisis was caused by the Wall Street shock wave of 1929, after which the flow of Mexico’s government revenues fell sharply.
The only hope that existed at that time was the increase in the level of taxes.
The Covid-19 crisis
Today, the economy of millions of Mexicans has been severely impacted by the covid-19 emergency. From millions of layoffs, sharp declines in investment, or even the closing of businesses.
According to figures from the Mexican Social Security Institute (IMSS), more than 647 thousand formal jobs were lost in 2020, affecting thousands of families’ stability.
This causes the basic expenses of Mexicans to be considerably reduced, from the action of going to the store to buy an item, not being able to pay for a service (TV, internet, etc.), or not being able to pay off a long-term debt.
However, confinement measures have been necessary to reduce the impact of the covid-19 emergency. According to the International Monetary Fund (IMF) analysis, Mexicans’ personal economy will recover over the next five years or more.
Mexico’s economy faces an enormous challenge. This event will go down in history just like the 1932 crisis or even worse.
