[Economics] The growth of the Mexican economy does not meet the expectations of the Government

[#Wittels-]

The Mexican economy grew 4.8% in 2021, a figure that disappoints as it is less than the 6% that the Government expected and that causes debate among specialists about a possible recession after the contraction in two consecutive quarters.

The gross domestic product (GDP) of Mexico decreased by 0.1% quarterly between October and December, which is added to the fall of 0.4% from July to September, according to preliminary data released this Monday by the National Institute of Statistics and Geography (Inegi).

Despite the economic rebound in the first half of 2021, services fell 0.7% quarter-on-quarter in the last period, with growth of just 0.4% in industry and 0.3% in agricultural activity, according to the Seasonally adjusted figures from Inegi.

Throughout the year, based on original figures, the country had an annual growth of 4.8% supported by the growth of the industrial sector (6.5%), services (4%) and agriculture (2.9 %).

This growth occurs after the historical contraction of 8.2% of GDP caused in 2020 by the COVID-19 crisis, which has left more than 4.9 million cases and 305,000 deaths in Mexico, the fifth highest figure in the world. world.

“Although a very high growth is heard, it is still a rebound effect,” Gabriela Siller, director of economic analysis at Banco Base, warned Efe.

 

"stagflation"
The Government expected to grow 6% anchored in foreign trade, in particular in the Treaty between Mexico, the United States and Canada (T-MEC), in addition to consumption motivated by the absence of restrictions due to the pandemic and vaccination.

In contrast, the figures show a decrease in Mexico in the second half of the year coupled with general inflation of 7.36% in 2021, the highest in 20 years, for which the country has entered into "stagflation", something that hadn't happened since the 1980s, according to Siller.

“Mexico will not recover the pre-crisis GDP level until 2024 and in per capita terms until 2026. There is even talk that Mexico has fallen into stagflation, which is the combination of these two economic events, which is economic stagnation and a high inflation," he explained.

Throughout 2021, the Mexican economy suffered from the waves of the delta and omicron variants, in addition to the bottlenecks in the value chains and shortages of supplies that affected the industry, particularly the automotive sector.

And there are also internal factors, Siller clarified, who said that Mexico is among the 16 economies of the 50 largest in the world that have not yet fully recovered their pre-pandemic level.

"The fall in GDP in the last quarter of the year was determined by the coronavirus crisis, but also by other factors such as high inflation, insecurity in Mexico, and economic policies that have generated uncertainty."

Analysts fear that Mexico did not take advantage of the growth of its largest trading partner, the United States, which reported a 5.7% increase in GDP in 2021, the highest since 1984.

"Despite having benefited from favorable external conditions, the Mexican economy showed clear signs of weakness in the second half of 2021, reporting a weaker performance than that observed in other countries in the region," said Renzo Merino, an analyst at Moody's. , in a media note.

 

recession debate
Mexico's contraction has sparked a debate about a possible recession.

BBVA Mexico acknowledged that in the country there is no definition of recession, but in the United States it is defined as two consecutive quarterly falls, as experienced by the Mexican economy.

Ricardo Aguilar, an analyst at Invex, also detected in an analysis disclosed to the media of a "technical recession", although the deputy governor of the Bank of Mexico (Banxico) Jonathan Heath wants three criteria to be required that are not yet fully met: duration, depth and spread.

“There are many economists who question whether the Mexican economy entered a new recession for having two consecutive quarters of sequential contraction. There is also the possibility that the recession that began in 2019 or 2020 would not have ended," added Julio A. Santaella, former president of Inegi.

While the debate rages on, the consensus is that Mexico is in for a tough year.

"Regardless of who won, we Mexicans lost: our economy is similar in size to what it was in 2016," lamented Brenda Flores, an economic analysis researcher for the Mexico group How are we doing? EFE

 

Link: https://www.larepublica.ec/blog/2022/01/31/ecimiento-economia-mexicana-alcanza-expectativas-gobierno/