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Jesús Garza: The dualism of the national economy

Jesus GarzaJesús Garza Source: Courtesy

The national economy it grew 12 percent in the third quarter of the year compared to the second quarter. Inside, the strong growth of the industrial sector (22 percent quarterly), due to the solid dynamism of the US economy. In contrast, the service sector It only increased 8.6 percent, and this sector represents around 67 percent of the national GDP. Formal jobs are recovering, but more gradually. This is explained by the duality that the national economy experiences today.

The strong economic contraction In the first half of the year, due to the confinement, it strongly affected the country’s internal demand. I know they lost thousands of jobs, which adding the informal ones, reaches more than 12 million. The recent recovery of jobs is taking place in the manufacturing sector, especially in exports. This is due to the fact that the United States is recovering steadily. The manufacturing exports Nationals are growing and are likely to regain their early 2019 level by the end of 2019.

In contrast, the domestic demand stays depressed. The closure of thousands of SMEs It reflects the adverse impact of the pandemic and the lack of fiscal support for these companies. In addition, the liquidity and credit programs designed by Banxico they have not translated into higher loans and lower interest rates. The strong loss of SMEs, which represent more than 70 percent of national jobs, will cause a significant increase in the country’s poverty rates. According to ECLAC studies, the poverty will increase in Mexico 46 to 67 percent in one year.

Looking ahead, it is clear that the economy will enter two growth rates. First, that related to external demand, especially exports to the US, and secondly, internal demand, which will have moderate growth. The US economy is expected to recover in about 1 and a half years in an environment where fiscal supports they will continue to protect jobs in that country, and interest rates will remain at historic lows for several years. Likewise, the national economy is likely to recover in at least four years.

This dualism of the economy will deepen the inequality in society and in the regions of the country. Border states, traditionally exporters, will benefit and recover faster.

This is an opinion column. The expressions used here are the sole responsibility of the person signing them and do not necessarily reflect the editorial position of El Financiero.