La Jornada – S&P’s growth forecast raises to 5.8% in Mexico

Mexico City. Standard & Poor’s (S&P) raised its growth forecast for Mexico to 5.8 percent this year, as the country benefits, and will continue to do so, from a “strong recovery in the United States” through industrial exports and remittances.

The risk firm stated that Mexico is the only Latin American country to undergo upward revision for both 2021 and next year, with an additional 2.7 percent increase expected. The Mexican economy contracted by 8.5 percent last year.

Regarding the forecast released last March, the growth of the Mexican economy in 2021 will rise one percentage point higher by 0.2% next year.

S&P added that this advance in the forecast stems from the fact that exports are back to their pre-pandemic levels and that remittances are about 1% higher than normal as a percentage of GDP.

However, the investment outlook, outside of the manufacturing sector, remains relatively weak. This is partly due to government policies that have reduced incentives to invest in key sectors such as energy.”

Moreover, since economic stimulus measures to counter the impact of the pandemic did not exceed 1% of GDP in 2020, the damage to small and medium-sized enterprises has been significant. He added that sectors dominated by these types of economic units may take longer to recover.

Overall, Standard & Poor’s raised its 2021 growth forecast for the six largest Latin American economies to 5.9 percent, compared to 4.9 percent previously.

This progress is due to the better-than-expected performance of the service sectors so far this year, plus households and businesses adapting quickly to living in a pandemic, and the impact of the blockade on activity is much less than expected.

However, with the exception of Mexico, GDP forecasts for 2022 for most of the region’s economies have been lowered, because “monetary policy normalization, fiscal tightening and less predictable policy actions will delay recovery.”

He added that the pandemic has hit low- and middle-income families the hardest, and that heightened social and political tensions will generate a high degree of political uncertainty, which could dampen investment and reduce potential long-term GDP growth.