IMF optimism does not eliminate risks • Forbes Network • Forbes Mexico


During this week, we witnessed many economic news that discussed and analyzed, as in previous weeks, the recovery that the Mexican economy expects to experience in the coming years. But if it is necessary to highlight one of these news about the said recovery, it is the one published by the International Monetary Fund (IMF). In this sense, the multilateral organization expects the Mexican economy to grow by 5% this year, 0.7 percentage points higher than expected in January.

Likewise, for the year 2022, the agency expects the GDP to show, in the same way, higher than expected growth, reaching a growth of close to 3 percent; This is a growth of 0.5 percentage point increase in relation to the data shown in the WEO. Thus, we are talking about data that confirm, in a certain way, the revival of Mexican activity that is starting to spread in advanced economies. Economies that start to resume activity with the arrival of vaccines, financial incentives are provided to combat the economic cycle, while funds arrive to fix structural weaknesses that these economies have long delayed, without implementing reforms.

However, the International Monetary Fund, despite this improvement, attributes the upward adjustment to advanced economies, which are beginning to show better performance. Regarding the Mexican economy, the economic downturn in the country is very noticeable, and although we are talking about one of the highest growth rates in many years of history, the economy is expected to close the year with a GDP level lower than the pre-pandemic level. And all this without taking into account the chain of dangers that could make this statement a true lie in the future.

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Thus, the past year, 2020, was a disastrous year for the Aztec economy. The paralysis of economic activity, in a scenario in which the epidemic spreads more than expected by the International Monetary Fund, has led to a contraction in Mexican GDP which, after the INEGI review, rose to -8.5%. If we take into account the growth predicted by the organization itself, at the end of this year and even after 2022, the Mexican economy will not have regained the level of GDP before the epidemic; So it will not fully recover.

Projections indicate that Mexico can recover to its previous level in 2023, but as we said at the beginning, we must take into account many of the conditions that determine the behavior of the Mexican economy, and thus the expectations set by the various organizations. Which is that, to start with a very relevant adjustment factor, and as explained by the IMF, was one of the factors most influencing this improvement in outlook, we can observe Mexico’s financial response to the recorded contraction.

In this sense, Mexico was one of the economies that provided the least financial response to fighting the pandemic. Its institutional weakness, which justifies its scarcity of resources, leaves it without an acceptable margin of maneuver to combat the pandemic. While other economies have allocated nearly 11% of their GDP to combat the cycle, such as the United States, other countries have allocated nearly 9%, such as Germany, and in the advanced economies scenario, 6, 7% on average, emerging economies appear. , At 2.3%, a fairly high overall response, and Mexico for its part does not reach 1% of its GDP; As one of the economies that provided the least response, despite the fact that the IMF highlighted, among its aforementioned conditions, the support of this type of policy by the state.

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But as with the financial response, Mexico is also presenting positions that limit the potential of its economy, given that these weaknesses could indicate a recovery. Based on the fact that the growth of the Mexican economy has been extinguishing for years, Mexico is a country that, due to its institutional weakness which is reflected in the OECD ranking, which shows the ratio represented by financial income as a percentage of GDP, is better able to implement reforms. And we are talking about very necessary reforms, trying to correct situations such as the one we see when analyzing the informal economy, where about 60% of the population works outside labor legislation.

And on this that we are commenting on, we must add another situation, crucial to healing, which is the administration of vaccinations. In this context, the state vaccinates at an acceptable rate. However, its weak health systems, in a scenario where new waves might occur, could become saturated; This way it delays vaccination. That is, without delving into an assessment of the vulnerability that a country represents when it comes to borrowing, the risks are very much present and must be taken into account.

For this reason, the IMF results should be greeted with the optimism they show. But this, as happened with previous publications, should not generate the satisfaction of the leader who, as we know, loves and needs this data to strengthen the legislature in which it is already reaping two years of zero growth.

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