Mexico ends 2020 with the worst economic crisis in 100 years

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Different private and international organizations have expressed concern about the economic crisis facing the country

The Covid-19 pandemic has caused the Mexican economy to suffer its most severe crisis in a century with more than 10 million new poor people and the closure of at least one million micro, small and medium-sized enterprises (MSMEs).

“It leaves us with an economic contraction of around 9%. This is the most severe in practically the last 100 years, ”economist Jessica Roldán, director of analysis at Finamex Casa de Bolsa , tells Efe .

The Ministry of Finance and Public Credit (SHCP) foresees a drop in GDP of 8% in 2020 with a rebound of 4.6% in 2021, after during 2019 there was already an economic contraction of less than one percent in the first year in power of President Andrés Manuel López Obrador.

Even the fall of 2020 may be even greater according to the International Monetary Fund (IMF), which estimates a decrease of at least 9% this year, the “steepest since the Great Depression” contraction, with a “modest” subsequent recovery.

Although the evolution of the pandemic causes global uncertainty about the fourth quarter of 2020 and the first of 2021, Roldán considers the government’s prospects too optimistic, since Finamex predicts a rebound of 3.5% in 2021. “What we already know is that Mexico is positioned as one of the economies, at least in Latin America, that will be registering the highest rates of contraction and that leaves it a little worse positioned for the rebound that must be there, “he adds.

PRESIDENCY LOST

Andrés Manuel López Obrador came to the presidency in December 2018 with the promise of annual growth rates of 4%. Now he will have to dedicate the rest of the six-year term to recovering the levels prior to his administration, observes Edmar Ariel Lezama, coordinator of the Unique Program of Specializations in Economics at the National Autonomous University of Mexico (UNAM).

“We are going to have a terrible 2020 and, surely, the remainder of the six-year term will be to try to recover a little what was lost this year, I do not know if it can recover, the fall is the largest we have had and There are few plans for reactivation ”, says the academic.

The crisis has also erased the advances in employment because only 8 million of the 12 million lost by the crisis have been recovered, between formal and informal, says Lezama, citing figures from the National Institute of Statistics and Geography (Inegi). The pandemic also caused the definitive closure of more than 1 million MSMEs in which 3 million people worked, according to Inegi.

Meanwhile, a study by BBVA Mexico has indicated that if the economy declines by 7% this year, 12 million people would fall into poverty, which would erase years of social policy.

WITHOUT OFFICIAL REMEDY

Mexico has also stood out for being one of the countries in the world and the region in dedicating fewer public resources to alleviating the economic crisis, by allocating less than 1% of GDP, according to the Economic Commission for Latin America (ECLAC).

“There was little reaction from the federal government to be able to deal with these elements, plans continue to be announced, but there is no specific date to start, or it seems that they are too short,” says the academic from UNAM.

López Obrador has defended his economic formula of not incurring debt to “rescue those above”, as happened in the “neoliberal period.” He has also asserted that the economic curve exhibits a “v” behavior, that is, that it bottomed out in the second quarter of the year, but is now entering the take-off phase.

“Action in health has to be balanced, that is, facing the pandemic as it has been done and also reactivating our economy, we cannot just dedicate ourselves to addressing the pandemic, to shutting down economic activity completely in the country because very serious, ”he recently commented.

AGAIN UNCERTAINTY

Despite the serious crisis situation, Mexico will face its 2021 with a budget considered the most austere of the 21st century, with an annual reduction in spending of 0.3%. “The Mexican State would have to be a little more sensitive to the moment we are seeing, when looking at the budgets, little is still being allocated to health, little to education,” laments Lezama.

Next year will be marked by three factors, says Jessica Roldán, the impact of the global economy with a “difficult” first quarter due to infections, the vaccination strategy and the labor and investment ravages. “If you put all this in addition to an electoral year, the outlook is quite complex for the Mexican economy in 2021,” the analyst concludes.

Source: eleconomista.net

Mexico Daily Post

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