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The fall in GDP in Q2 (-18.5% QoQ; -22.1% YoY) slightly exceeded expectations and confirmed the serious effects of the containment. Domestic demand suffered most of the adjustment (-16.1pp QoQ; -4.2pp YoY), but external demand also fell. The fall in hours worked was intense and productivity increased.
July 30, 2020
U.S. | 2Q20 GDP: Worst quarter on record overshadowed by strengthening pandemic headwinds
GDP dropped by 32.9% in the second quarter, marking the steepest decline in over-the-quarter growth since 1937. The rise in the number of COVID-19 cases since mid-June has lowered the likelihood of the “V-shaped” recovery. Economic and health outcomes will be interwoven in the near future.
The Covid-19 spread, along with the mobility restrictions, hit an economy with a three-year long recession. These facts lead us to expect a “square root” shape to emerge from the crisis in the following quarters, mainly driven by a “statistical rebound” rather than a genuine economic recovery.
The road to recovery will be long and bumpy. Mexico needs countercyclical economic policies and to regain investor confidence to better address the challenging environment.
Baseline assumes real GDP declines by 4.4% in 2020. Peak unemployment reached, but risks to the labor market remain. Disinflationary headwinds abate, but inflation to remain low in 2020. Fed to keep rates at the Zero Lower Bound, balance sheet growth to continue.
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.
In recent days, as a result of the publication of the document "The new economic policy in times of the coronavirus", a debate has erupted in the country about whether economic growth should be an objective of economic policy and an adequate measure of development and well-being.
May 5, 2020
Mexico | GDP falls 1.6% QoQ in 1Q20; a prelude to the biggest recession in recent history
Although an early deterioration in the industrial sector was expected due to the early halting of global value chains, the effect on consumption in March seems to be greater than that shown by the retail sales data to date.