Economics: 2021 Economic prospects and hurdles

MEXICO - Report 18 Jan 2021 by Mauricio González and Francisco González

It will take a lot more than a successful Covid-19 vaccination drive to get the Mexican economy back on a firm recovery path, and an effective inoculation campaign is by no means certain at this point. Obviously the 2021 outlook will be determined by many moving parts, ranging from the strength of external demand for Mexican goods, how much private consumption and investment might revive, and the ultimate wildcard of public policy.

The greatest challenges on the level of growth sources are to be found in private-investment-related variables. Gross physical capital formation is especially sensitive to the signals government emits, and continues to evaporate at a double-digit pace, although one much less pronounced than the roughly 38% plunges recorded early in the pandemic. Private consumption has been falling considerably, and with the pandemic forcing new lockdown measures, consumers continue to exhaust their savings as they struggle with reduced earned income, joblessness and the mounting debt burdens both individuals and companies are amassing.

The situation is no more encouraging on the external front. Exports are the only aggregate demand component that has begun to register something of a relative recovery, but export sales have experienced a relative deceleration in recent months, especially in the crucial automotive sector. And while the relief measures announced by the incoming Biden administration are likely to help sustain robust remittance flows, his tighter policies for controlling the pandemic could depress demand for goods and services of Mexican origin in the United States, and even lead to renewed supply change interruptions such as the ones we experienced between April and July. Moreover, business sentiment remains deeply pessimistic.

In such a complicated context for economic recovery and great uncertainty as to growth prospects, this week we are providing three scenarios of aggregate demand performance for 2021.

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This report is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This report is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this report or its contents.