The extraordinary uncertainty that confuses the Mexican economy Forbes Network Forbes Mexico

In recent weeks, we have witnessed a series of events that have created exceptional uncertainty in the country. Immersed in a process of political restructuring after an election that left President AMLO without a qualified majority, and in a scenario in which published indicators on the economy showed greater optimism, society wondered what the future would be and, more importantly, who would be lying in front of so many lights and shadows.

And while it may seem like a mess, it makes sense that doubts arise in such a scenario.

When it comes to economic growth, we have to say that the outlook is good and stable. On a macro level, I think the outlook will not suffer drastic deviations from the expected scenarios, so it doesn’t look like we will see any surprises in this regard. The economy is growing, as it is all over the world after the great crash it experienced last year. This has been observed in statements made by various organizations, and in those that present their views. The outlook for Mexico has improved over the months.

The recovery of the US economy, after a fiscal response from Biden of 11% of GDP that surprised the world, has hit the Mexican economy, benefiting from the resumption of activity of its neighbor to the south. For this reason, the Organization for Economic Co-operation and Development (OECD) has improved its growth forecast for Mexico, reaching levels of over 5% by 2021.

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Data confirming this recovery was recently found in indicators such as the Index of Economic Activity (IOAE) issued by the National Institute of Statistics and Geography (INEGI). As the May review shows, this month the Mexican economy is offering a historic growth rate of 24.8% year-over-year. Some of the data measured by sectors is even improving. And all of this, capping 3 straight months of growth since the start of the quarter in March.

However, in connection with this, I see fit to make an estimate, a nuance as I like to call it. And if we look at this growth rate, the basis for the calculation is taken from last year, when the Mexican economy, along with many others on the planet, was collapsing at a very accelerated rate. A reason that should lead us to be more careful in dealing with stats, because if what we want is to go back to the starting point, then comparing the growth on the basis of 2020 does not make sense, as it should be compared to the exercise that shows the level we should return to.

We can see this in the monthly comparison, where there is no breakdown and the monthly growth rates for April and May are 0.4% and 0.5% respectively.

In short, the Mexican economy is starting to move. The weakness of this economy in providing an acceptable fiscal response, being that which allocated the least resources to the economies of the region – 1% compared to an average of 2.4% – was offset by the good performance of trade, and a neighboring country, as its main trading partner, has hit the faltering Mexican economy. However, we must be careful with the statistics and not make misdiagnoses in a recovery that still has a long way to go.

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Changing the subject, entering into the other we have mentioned, and complementing that mixture that leaves us with a bittersweet taste after reading the press, we have another pending topic to comment on, such as the elections held in Mexico, and the pessimism raised by many experts, after analyzing the results. And although economics and politics have always maintained a relationship, as evidenced by the many examples we find around the world, the problem of elections has more to do with long-term consequences.

In a recovery process like the current one, and where governments agree to implement expansionary policies to reform the economy from the ground up, an economy like Mexico must work on far-reaching reforms that, through this transformation of the economy, improve their being citizens. Reforms that can be promoted in an environment of cheap finance, where agencies are willing to provide loans, and countries to reciprocate because of the crisis they caused.

After losing a qualified majority, AMLO, and its government in general, are having more difficulty implementing far-reaching reforms like those the country needs to achieve the real development it so craves. Well, the potential is huge, and these reforms could lay the foundations for a new era of the Aztec economy, where, along with the United States as a major trading partner, this springboard is a much-needed neighborhood that seems hard to find. Although considering the president’s trajectory since his rise to power, we won’t know if that possibility is preferable, or would, even, be a higher cost in the latter case.

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