July 15, 2020

Economic authorities in Mexico see prospects deteriorated by the pandemic



The Stability Council of the Financial System of Mexico said on Tuesday that the prospects for the world and Mexican economy have deteriorated as a result of the impact of the coronavirus pandemic and the sanitary measures to contain it.

In updating its balance of risks for the financial system, the Council chaired by the Secretary of the Treasury, Arturo Herrera, underscored the challenges that it faces in the wake of the COVID-19 pandemic.

The agency considered that the global and national economic prospects “have deteriorated significantly” as a consequence of the impact of COVID-19 on economic activity.

In addition to the effects of the pandemic, there is still the risk of a further slowdown in the global economy and the uncertainty associated with its recovery, as well as increased volatility in international financial markets and a recomposition of flows to lower-risk assets, he pointed.

Among the internal factors, “uncertainty prevails over the depth of the contraction of the Mexican economy and the speed of the recovery, mainly due to the necessary gradual reopening to avoid growth in COVID-19 infections,” he explained. .

It considered as internal risks the additional adjustments to the sovereign and Petróleos Mexicanos (Pemex) credit ratings that have been reduced by the rating agencies.

Mexican authorities have said they expect a speedy recovery in economic activity after sanitary measures to prevent its spread, although analysts and experts believe that the country may end the year with a drop of -10.5% in its economy.

The Council highlighted that the country’s financial markets had “a better performance in the second quarter” and that lower interest rates have been observed for government securities, a decrease in risk premiums in addition to the appreciation of the exchange rate, although in an environment of volatility.

He stressed that the financial system of Mexico, as a whole, faced the start of the pandemic in a solid position of liquidity and capital and that despite the fact that the situation remains stable, risks persist that could affect its proper functioning.

The Council is made up of the secretary and undersecretary of the Treasury, the governor and two deputy governors of Banco de México and the presidents of the National Banking and Securities commissions, National Insurance and Bonds, National Retirement Savings System and the head of the Institute for the Protection of Bank Savings.

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