Economy & Business - June 2021

MEXICO| Growth forecast. On 2 June Mexico’s central bank (Banxico) released its latest quarterly report in which revises up its GDP growth forecast for the year to between 5% and 7% up from the previous projection of between 2.8% and 6.7%. Mexico’s economy contracted by 8.5% in 2020 as result of the coronavirus (Covid) pandemic. But it is expected that Mexico’s economy will rebound this year as the global economy starts to return to normality. The Banxico report says that the improved forecast is the result of better-than-expected performance in the first quarter of the year, as well as the expectation that the economic recovery will speed up in the second quarter due to increased external demand, particularly from the US, thanks to its major fiscal stimulus package. Deputy finance minister, Gabriel Yorio, has said that if Mexico succeeds in in vaccinating around 1m people a day, it would be possible to fully reopen the economy again in September. Yorio said that this would enable a return to pre-pandemic levels of economic activity towards the end of the year. It would potentially also lead to a significant recovery of formal employment, though Yorio admitted that informal employment will take longer to recover. According to the Banxico report the growth scenario would lead to the creation of between 350,000 and 570,000 formal jobs, higher than the previous estimates of at least 250,000 jobs. Despite these optimistic forecasts, inflation will continue to be a challenge for Banxico, as it reached its highest level for three years in April with 6.8%. Banxico estimates that it will reach 4.8% by the end of 2021due to supply shocks and pressure on the prices of agricultural products and energy.  However, Banxico Governor Alejandro Díaz de León said that high levels of inflation would only be temporary. For 2022 Banxico estimated that the economy will grow by between 2% and 4%. With regards to job creation, the expectation is that between 390,000 and 590,000 formal jobs will be created, unchanged from the previous quarterly report. 

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