July 26, 2021

Mexico cuts growth forecast for 2020 to between -3.9% and 0.1%



The Ministry of Finance and Public Credit (SHCP) cut its growth forecast for 2020 this Thursday from a range between 1.5% to 2.5% to another between -3.9 and 0.1%, according to the document “Pre-Criteria 2021” published today.

This organism explained that the macroeconomic perspectives at the present juncture “have a high level of uncertainty regarding the complexity of the situation of the pandemic”, which makes it difficult to establish a punctual forecast of growth for the Mexican economy.

“For this reason, a range of GDP growth for 2020 between -3.9 and 0.1% is considered, consistent with projections by international organizations and private sector analysts,” he added.

The SHCP explained that the estimates of public finances for 2020 “are made under a prudent scenario that considers a balance of risks in accordance with the high uncertainty” that exists regarding economic activity.

In addition, he considered that the current situation “is more complex than could have been anticipated in September 2019, when the 2020 Economic Package was presented.”

The document noted that “in a very short period the global economic outlook has deteriorated rapidly and significantly.”

The sanitary measures necessary to contain the pandemic are generating significant negative effects on economic activity, the disruption of global supply chains, greater uncertainty, as well as volatility in financial markets around the world.

Under these considerations, it is estimated that the Financial Requirements of the Public Sector (RFSP) will amount to 4.4% of GDP; the public balance will record a deficit of 3.3% of GDP; while the primary balance will be at -0.4% of GDP.

Meanwhile, in terms of public finances, in 2021 it is expected to decrease the RFSP to 4% of GDP, a public deficit of 3.5% and a primary deficit of 0.6%.

SUPPORT FOR MEXICAN OIL

In the document, the Government of Mexico reiterated “the importance of Pemex as a strategic asset of the country and evaluates additional support measures to those already implemented for this year.”

However, “Pemex will seek to make economies as well as alternative sources of income to face the effects on its finances of the reduction in the price of oil.”

The Treasury pointed out that to face the crisis it has mechanisms such as the Budgetary Income Stabilization Fund (FEIP), which at the end of 2019 had 158,400 million pesos (about 6,545 million dollars).

It also has international reserves of $ 185.5 billion and a flexible line of credit with the International Monetary Fund for $ 61.4 billion.

Although the speed of the reestablishment of the world economy and the Mexican economy “is still uncertain”, by 2021 a recovery from the effects of the COVID-19 pandemic is expected.

He specified that by 2021 economic growth is expected to improve with respect to 2020 “and will be between 1.5 and 3.5%, a range based on the improvement in economic activity” that is expected from the third and fourth quarters of this year.

The aforementioned document begins the dialogue with the Mexican Congress on the economic and public financial prospects for the end of 2020 and next year’s fiscal year, the details of which will be known with the delivery of the Economic Package for fiscal year 2021.

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