On Thursday, Banxico cut the benchmark interest rate for the ninth consecutive time
Such action could help encourage investment and spending, thereby promoting a faster recovery.
However, even the perspective even within the central bank is that Mexico’s GDP will fall by eight percent.
There is no doubt that the Mexican economy is in a very dark moment thanks to COVID-19. Due to the fragility in the finances of many people and small businesses, and in conjunction with the long quarantine, the impact has been worse than in other countries. Unfortunately, it seems that the national Gross Domestic Product (GDP) is not only not rebounding. On the contrary, some indicators show that in fact the situation is still going from bad to worse.
According to ., the latest estimate, the Global Economic Activity Indicator (IGAE), an approximation of monthly GDP in Mexico, for April, has just been revealed. And the numbers are devastating. For that period, compared to the previous 30 days, the country’s production plummeted by 17.3 percent. It not only represents the disappearance of almost a fifth of the national wealth. It is the largest drop observed since registration began.
In the IGAE review for April 2020, the sector most affected by the big drop was manufacturing. In this segment, there was a 25.1 percent drop in activity compared to the previous month. This, in large part, because it was the sectors such as the automotive industry that had to completely suspend their activities due to the pandemic. It is also worth noting that Mexico’s decline was less than expected, at 1.4 percent.
A pessimistic perspective for Mexico
Although the IGAE figures are a hard blow, they are not really unexpected. This, because the Mexican economy has shown signs of struggle for several months. Just yesterday, the International Monetary Fund (IMF) estimated that the country’s economy would drop by 10.5 percent in 2020. Companies like Nissan have started the layoff of hundreds of local workers. And in general, the population is much more concerned about the financial crisis than the health crisis.
It cannot be denied that the results of the IGAE, although preliminary, are devastating. At a time when the whole of Mexico is beginning to reopen, what is least needed to give confidence to consumers and businesses are historic falls. True, these estimates still correspond to the period of the Great Encierro. Many experts agree that when the figures for June and July arrive, there should be a rebound. But it still reflects a challenge.
All these losses accumulated month by month present a complex reality for Mexico. Even if business returns overnight, and confidence recovers in an instant, it is highly unlikely that double-digit progress can be seen in the short, even long term. The pandemic will mean for the country a serious setback that, at the usual rate of development in the country, will take years to close. The consequences of this crisis will remain for a long time.
If it can serve as consolation, the case of Mexico is not unique. South Korea is experiencing a second peak in cases that threatens to shut down the nation’s economy again. Within the United States (USA), brands such as Apple have been closing their stores for a few weeks before the return of infections. And worldwide, a loss of six trillion dollars is estimated in the global economy, with the sole exception of China.
The outlook may seem dark for Mexico, but there are several experts who have proposed solutions for the country’s economic recovery. According to La Jornada, it will respond a lot to how the market in the US is restored, which has always had a close connection to the Republic. Animal Político believes the rebound would start until 2021, but weak thanks to some government decisions. And El Economista points out that everything will depend on the pandemic.
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