The economic impacts of the pandemic in Mexico
Gerardo Esquivel vice-governor, Banxico
This document available in Spanish so far, basically states that in the second quarter the Mexican economy fell between 19% and 20%. and forecasts that the third quarter will be better with a negative growth of between -8% to -12%, and the fourth quarter improving to between -4% to -8%, giving a year to year negative growth of between -8.5% to -10.5%.
In his opinion, the fall in economic activity bottomed out in
May and the recovery began to be observed from June with the incipient reopening of some sectors of the economy.
He points out the difficulty for a government like México’s to increase spending based on the deficit because unlike developed economies that have the ability to generate economic activity and service and pay the debt, in a country like Mexico, which in itself faces a complicated scenario regarding public finance, and which is on the verge of losing investment grade, a significant increase in its debt could be excessively expensive from an intertemporal perspective. Yet he suggests the following measures to be adopted:
1) emergency unemployment insurance that could benefit a little more than
one million formal workers who have lost their jobs; 2) a protection program to the payroll that will help companies sustain a greater number of formal jobs; 3) the deferral in the payment of social contributions to micro, small and medium business; 4) a special support program for the payment of rents or other fixed costs (for restaurants or other businesses especially affected by the pandemic), and; 5) a program to give minimal support to informal workers who have lost temporarily their source of income.
“The crisis will leave a multitude of new poor: people who had a job before the pandemic or a source of income and that from now on they will no longer have it. Those people very likely were probably not beneficiaries of any social program. In fact, maybe they weren’t poor, but still economically vulnerable. An external shock like the pandemic may end up throwing them into poverty and these people won’t get out of there that easily as long as the economy does not fully recover.”