Mexico | The economic recovery will be slow and square root shaped

Summary

Our base case for 2020-2025 GDP growth forecasts does not point to the recovery of the fourth quarter 2019 GDP level until the end of 2023.

Key points

• Key points:
• But given the downward bias to our 2020 GDP growth forecast more towards the lower limit of our forecast interval ranging between -6% and -12%, the recovery of such level would not occur until after 2025
• The anticipated recovery of GDP after the Covid-19 pandemic effect shows that it would neither have a “V” nor “U” shape but would look more like the square root symbol
• Using the intervention analysis methodology, we estimate that such effect on the 2Q20 GDP will be -10.8% and -16.0% in relation to 1Q20 under our base and adverse scenarios, respectively
• This methodology also indicates that the magnitude of such effect will vanish very slowly and will be lower than 1.0% in two and four years under the base and adverse scenarios, respectively

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