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Mexican economy comes to a ‘grinding halt’

by Yucatan Times
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The country’s Gross Domestic Product advanced 0.4% percent in the first quarter of the year, according to the latest estimate of the Inegi.

The Mexican economy had a ‘dry stop’ in its recovery during the first quarter of 2021, according to the latest estimate of the National Institute of Statistics and Geography (Inegi), published this Friday, April 30th.

GDP in the first quarter of the year advanced 0.4 percent compared to the last quarter of 2020, mainly due to the outbreak of COVID-19, added to the gas crisis that occurred last February.

In the two previous quarters, the country’s economy had registered advances of 3.3 and 12.4 percent, hand in hand with the economic reopening that took place between July and December of last year.

This figure may vary when the institute publishes the revised data on May 26.

By sectors, the primary (agriculture and livestock) fell 1.3 percent and the tertiary (services) rose 0.7 percent. The secondary component (industry) did not report changes compared to the previous quarter.

Mexican economy:

TrimesterQuarterly change in GDP (%)
4th. of 2019-1.1
1st. of 2020-1
2nd. of 2020-16.8
3rd. of 2020+12.4
4th. of 2020+3.3
1st. from 2021+0.4

What is behind the ‘lack of gas’ of the economic recovery?

One of the factors was the literal shortage of that resource that affected Mexico in February due to the frosts in Texas.

The winter storm led several assembly companies, such as Audi, Honda, and Ford, to stop operations at their factories, while the National Center for Natural Gas Control (Cenace) had to issue a critical alert. In addition, several states in the north of the country went days without power due to frost.

In addition, you will remember that in January the red light returned to various entities, such as Mexico City, the State of Mexico, or Nuevo León, which led to the closure of hundreds of businesses and economic activities that were already affected by the pandemic.

The spread of the new coronavirus abated in weeks after the point that, currently, more than 70 percent of states are below the high-risk phase (orange traffic light).

And it is this situation and other factors that suggest that the economic recovery could find a new boost in the second quarter of this year.

On the one hand, there is the beginning of the vaccination against COVID-19 for people between 50 and 59 years old, which will begin from the first week of May and which plans to inoculate about 9.1 million people.

To this is added that the Government also began vaccinating teachers and educational personnel with a view to one objective: to restart face-to-face classes that have been suspended for more than a year in most of the country.

The Ministry of Finance and Public Credit (SHCP) projected on Thursday that the economy could be fully open by September 2021, due to the progress of the vaccination plan, the return to face-to-face classes, and the opening of sectors such as tourism and recreational activities that were the hardest hit by the COVID-19 pandemic.

Gabriel Yorio, Undersecretary of the Treasury, indicated that the vaccine delivery program represents about 150 million doses to be received by the end of August, so it is likely that at least 80 million Mexican men and women could be immunized for that month. or September.

However, there are still risks to the economy. “For all of 2021 we expect a growth of just 5.1 percent because the growth rate in important sectors will not be constant, in addition to the lack of investment, since the proposed reforms to certain laws that discourage investors and they worsen confidence, “said Ricardo Aguilar Abe, an economist at Grupo Financiero Invex.

“We see more of a rebound than a sustained recovery for the Mexican economy in 2021,” added James Salazar, CI Banco’s deputy director of economic analysis.

6 consecutive falls

In its annual comparison, that is, compared to the same period in 2020, GDP registered its sixth consecutive fall, according to INEGI data.

TrimesterAnnual drop in GDP (%)
4th. of 2019-0.8
1st. of 2020-2.2
2nd. of 2020-18.6
3rd. of 2020-8.5
4th of 2020-4.5
1st. from 2021-2.9

“The result would be affected by the frosts in the United States that caused the unavailability of some inputs and generated disruptions in industrial production in February, and on the other hand, also the confinement,” said Alejandro Saldaña, deputy director of economic analysis at Ve por Más.

With information from El Financiero

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