Mexico’s economy could contract by almost 13% this year, the central bank warned on Wednesday, after GDP data showed the pandemic lockdown had thrown the country into the deepest slump since the Great Depression.
Offering some rays of hope after lowering its economic forecast for the year, the Banco de Mexico suggested in its quarterly report that a recovery could happen more quickly next year than previously thought.
However, even in the bank’s most optimistic scenario, Latin America’s second-largest economy will be smaller at the end of 2021 than it was before the coronavirus hit.”It is too soon to say when we will return to pre-crisis levels,” central bank Governor Alejandro Diaz de Leon said.
The central bank said there was a high degree of uncertainty in providing economic forecasts during the ongoing pandemic, and as such provided three possible economic scenarios.
In the best case, the economy would shrink by 8.8% this year, and rebound by 5.6% next year, the bank said. In a gloomier scenario, growth would be a meager 1.3% next year.
The government previously estimated a recovery of the Mexican economy to pre-pandemic levels could be reached in one or two years so long as no new coronavirus outbreaks strike.
The Mexican S&P/BMV IPC stock index was down 1.3% on Wednesday, deepening its losses after the central bank report.
Gross domestic product fell 17.1% in seasonally adjusted terms in the April-June period from the prior quarter, data from the national statistics agency showed earlier on Wednesday. Compared with the same quarter last year, GDP contracted 18.7%.
Latin America’s largest economy Brazil, by contrast, is forecast to have contracted 9.4% in the second quarter after President Jair Bolsonaro launched a fiscal spending program to deal with the impact of COVID-19.
Fiscally conservative President Andres Manuel Lopez Obrador has resisted pressure to borrow to support the economy, while picking fights with some businesses.
“Data for the second quarter confirms the Mexican economy had its worst quarterly decline of the last eight decades, after the crash in 1932 caused by the Great Depression,” said Alfredo Coutino, an economist at Moody’s Analytics.
The pandemic, which has infected 568,621 people and killed 61,450 in Mexico, has hit the Mexican economy harder than those of its Latin American peers due in part to “the absence of stimulus measures to mitigate the effects on companies and families,” said Coutino.
Diaz de Leon said in a radio interview following the central bank report that both public and private investment are needed together in order to generate growth.
Lopez Obrador insists Mexico is on the right track.
“We’re already recovering, workers are already being rehired and we’re going to get out of this without getting over-indebted,” he told a regular news conference on Wednesday.
In a positive sign, Mexican economic activity advanced 8.9% in June from May, apparently confirming the president’s view that the economy “hit bottom” in April and May. The economy contracted 13.2% in June compared to the prior year.
A breakdown of the adjusted quarterly GDP data showed primary activities slipped 2.0%, secondary activities plummeted 23.4% and tertiary activities contracted 15.1%.
Primary activities include farming and fishing, secondary activities comprise manufacturing, mining and construction, and tertiary activities cover retail and the services sector.
Trending News on PVDN
Popocatépetl Volcano Exhibits Increased Activity; Yellow Phase 3 Alert Continues PUERTO VALLARTA (PVDN) - In the past 24 hours, heightened activity was recorded from Mexico's Popocatépetl volcano, with an alarming 315 exhalations detected, accompanied by water vapor, other volcanic gases, and ash, according to the Scientific Advisory Committee (CCA) of the National Civil Protection System (SINAPROC). Monitoring systems in place around the active stratovolcano also…
Shocking Case of Animal Abuse in Mexico: Man Throws Dog into Boiling Fry Oil PUERTO VALLARTA (PVDN) - A disturbing incident of animal abuse has sent shockwaves throughout Mexico, as a man allegedly threw a dog into a pot of boiling oil, resulting in the animal's tragic death. Authorities have detained the suspect for the assault on the dog and have issued an additional arrest warrant on charges of…
45 Bags of Human Remains Discovered in Jalisco PUERTO VALLARTA (PVDN) - A chilling discovery of 45 bags filled with human remains in a deep ravine in the El Mirador del Bosque neighborhood of Zapopan has escalated the search for seven missing youths last seen at a local call center. The Jalisco Attorney General's Office confirmed late Wednesday that the gruesome discovery was…
Two More Puerto Vallarta Beaches Are Awarded Blue Flags Puerto Vallarta (PVDN) - In the upcoming 2023-2024 season, Puerto Vallarta is set to host six beaches awarded with the Blue Flag accreditation, an esteemed international recognition for high environmental and quality standards. The Blue Flag committee has reconfirmed the status for four previously certified beaches while conferring this prestigious title to two new beaches…
‘Kingdoms of Mexico’ Distinction Launches to Boost Tourist Destinations With European Influences Puerto Vallarta (PVDN) - Miguel Torruco Marqués, the head of the Ministry of Tourism (Sectur), introduced the new 'Kingdoms of Mexico' distinction, a major initiative designed to enhance the appeal of Mexico's tourist communities on an international level. The announcement came during a presentation attended by the governors of Tlaxcala, Lorena Cuéllar Cisneros; Baja California,…
SEAPAL Vallarta Launches New Vallarta II Tank to Reinforce Drinking Water Supply PUERTO VALLARTA (PVDN) - SEAPAL Vallarta, the local water management authority, announced the successful integration and activation of the new Vallarta II Tank to its drinking water distribution system on Tuesday, May 30. This strategic addition is expected to enhance the availability of water in Vallarta homes, a pressing issue in the wake of the…
Investigation Continues Following Discovery of Skeletal Remains in Puerto Vallarta PUERTO VALLARTA (PVDN) – The mystery surrounding the discovery of skeletal remains in a rural area of Puerto Vallarta is yet to be resolved, according to State Prosecutor Luis Joaquín Méndez Ruiz. On his visit to Puerto Vallarta to participate in the Navy Day celebrations, the state prosecutor insisted the discovery is not a clandestine…
Puerto Vallarta Celebrates 105 Years as Municipality, 55 as City with Grand Anniversary Celebration PUERTO VALLARTA (PVDN) - Puerto Vallarta, one of the nation's favorite tourist destinations, celebrated the 105th anniversary of its elevation to a municipality and its 55th year as a city with a solemn session held in the central courtyard of the city's presidency. Presiding over the commemorative event was Mayor, Professor Luis Alberto Michel Rodríguez,…
It’s Getting a Little More Expensive for Americans Living in Mexico, Peso Surges to Over Seven-Year High Puerto Vallarta (PVDN) - The Mexican peso reached its highest level in more than seven years on Friday, June 2, driven by positive employment data from the United States. The country's stock market also experienced a notable rise as fears of a recession in the US diminished. At the close of trading, the peso was…- The Connection Between the Jalisco Cartel, Missing Employees at Call Center, 45 Bags of Body Parts, Timeshare Scams, and American Tourists PUERTO VALLARTA (PVDN) - More than a week after the initial disappearance of eight young workers at a call center in Zapopan, Jalisco, the case continues to be shrouded in mystery, leaving families distraught and demanding answers. The Jalisco Prosecutor's Office has made little progress in the investigation, according to the relatives of the missing…
