Economics: Data points to a restrained and uncertain rebound
The data published over the past month has provided evidence of a considerable rebound in activity compared to the relative lockdown much of the economy experienced during the second quarter, although not enough to dispel expectations of a very negative economic performance for full-year 2020. Some of the clearest evidence of that sequential firming of activity came in Inegi’s preliminary estimate of third quarter GDP, which was released October 30. The report showed that economic output had rebounded 12% above levels of the second quarter as the broad swaths of the economy that had largely shut down between late March and June as the country struggled to manage the Covid-19 pandemic started up again. But compared to the July-to-September period of 2019, the economy contracted 8.6% as both the secondary and tertiary sectors posted identical 8.8% declines. The most recent monthly indicators tell the same tale.
Though the absence of effective counter-cyclical policies will continue to weigh on the prospects for a more substantial recovery, Mexico has gotten considerable help from a totally unexpected source. The enduring strength of remittance inflows has helped avert an even more dramatic contraction of private consumption and crucially allowed poverty-stricken households to avoid a greater degree of precariousness.
Officials have also confirmed a small portion of the 227 national investment accord projects that have been considered for development as public private partnerships. The private sector was cautiously optimistic by the most significant indication to date of willingness by AMLO’s 4T government to enter into PPPs and streamline project approval and implementation. But although the selected projects were rebranded as "Actions and Projects for Supporting the Economic Recovery", they are unlikely to be a major reactivation factor as their impact will be deferred over subsequent years, and even then only if the government can provide greater investor certainty over the full life of the proposed joint undertakings − not something this government has excelled at.
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