November 19, 2020
Regional Analysis Mexico
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The dynamics of nominal GDP (in USD) from oil mining are closely related to the oil revenues of the federal government. In Mexico, as a price-taker in the international market, such dynamics are determined by the evolution of oil prices, the volume of production and the exchange rate.
We are currently in the midst of the worst economic crisis that Mexico has experienced in modern times. This has resulted in the sharpest declines in history and deeper impacts than those seen in 1995. Construction is not exempt, and the economic depression that the sector has been experiencing since 2018 has worsened.
The Mexican Institute of Social Security (IMSS) reported that 92.4 thousand formal jobs were created in August, equivalent to 8.3% of the 1.1 million jobs lost from March to July. The weak recovery in employment could not stop the deterioration of the labor market in a generalized way.
A generalized fall, but still with opportunities. The sectoral structure has been maintained despite the economic contraction. Sectoral mix sets the tone for state performance.
Our forecasts indicate that the current account deficit will stabilize around 1.5% of GDP in the medium term and there will not be a structural problem for its financing.
The sharp annual drop in public revenue as of April, which is very likely to continue until March of 2021, will make the Ministry of Finance tap the main rainy funds for budgetary stabilization (FEIP and FEIF) to avoid more public spending cuts.
The depth of the decline brings 2020 growth closer to the lower end of our forecast range, currently between -12.0% and -9.0%, in annual variation.
The estimates made by ECLAC, Coneval and BBVA Research are presented on the effect that the current crisis by Covid-19 can have on the increase in poverty and extreme poverty levels in Mexico in 2020.