Mexico. The longest and most painful recovery in its history.

Even with an expected growth of 3.8% in 2021, the economy would be 5.8% below its level reported in 2018.

MEXICO CITY (Banco Base) – Official forecasts point to a growth of more than 4% for the economy at the close of 2021. However, although the figure sounds high, the recovery in real terms will take several years.

“Mexico is aiming for the longest and most painful recovery in its history. External drivers drive the recovery,” said Gabriela Siller, director of analysis at Banco Base.

The financial institution has different scenarios for the recovery, in the most optimistic scenario, the economy would grow 4.6%, so the recovery to pre-pandemic levels would occur in 2024.

In the central scenario, and the most likely according to Base’s expectations, the economy would grow 3.8%, and GDP would recover to pre-crisis levels in 2025. This scenario even requires double-digit growth in the second quarter, which is subject to an efficient vaccination plan and some reactivation.

Forecasts indicate that, by year-end, the economy will be 5.8% below its level reported in 2018, the last year of growth.

Gabriela Siller explains that the recovery is a phenomenon that is a result of a low comparison base and mainly driven by the growth of the US economy, which is expected to be between 3.5 and 5% in 2021.

“The internal engines of the economy have to be stimulated, 3.8% sounds very high, but not even half of what was lost is recovered,” the analyst points out.

In terms of GDP per capita, Banco Base expects levels to recover in 2036 in a central scenario, while in the pessimistic scenario, the recovery would occur until 2039.

The manufacturing export sector may have a “V” shaped recovery. Simultaneously, private consumption is the most exposed to the pandemic and will have a contraction of around 11% in 2020, according to Banco Base’s estimates.

The institution highlights three factors of uncertainty. The reform to the Electricity Industry Law, the president’s speech against autonomous bodies, and the outsourcing reform may even generate problems for the collaboration between Mexico and the United States in energy areas and free trade matters.

The Yucatan Times



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