OECD lowers projection for Mexico's economy with a 10% drop
In anticipation of the beginning of the last quarter of the year, the market still finds some room to make further cuts to its economic forecasts for Mexico. The OECD now estimates a further contraction for this year and estimates a 10.2% drop in Mexico's GDP.
The Organization for Economic Cooperation and Development (OECD) proposed two scenarios back in June: a 7.5% drop in the Gross Domestic Product (GDP) if there was only an outbreak of Covid-19, or 8.6% if there was a second wave. Now, however, they believe that the effects of the pandemic were more severe, in addition to emphasizing the impact of effective fiscal policy.
According to an OECD analysis, Mexico is listed as one of the countries that will experience the greatest economic deterioration in the world. In the report presented on Wednesday, South Africa and Argentina would have the sharpest falls, with 11.5% and 11.2%, respectively, followed by Mexico and India with a contraction of 10.2 percent both, and then the United Kingdom, where the GDP is expected to fall 10.1 percent.
As the analysis shows, "high public debt and contingent liabilities, or a low tax base, limit the further use of fiscal policy to support growth and income for vulnerable groups in some large emerging market economies, such as Brazil, India, Mexico, and South Africa, shifting the burden of economic stabilization".
This figure is far below those projected a week ago in the 2021 Economic Package delivered by Secretary of Finance Arturo Herrera to Congress. In it, the team in charge of the country's public finances estimated a drop of 8% for this year and a growth of 4.6% for next year.
This last estimate is also high in contrast to that of the organization headed by José Ángel Gurría, since it is assumed that for the coming year the Mexican economy will only grow 3%, assuming that uncertainty will persist, there will be sporadic outbreaks of the virus, although there will not be general confinement, but local actions, and that the vaccine will arrive in the second half of 2021.