According to the estimates of INEGI, during the first quarter the Mexican economy collapsed by 2.4% compared to the same period last year, the steepest drop recorded since 2009.

The Mexican economy had already started 2020 weakened, in other words, before the virus affected the country and the world economy, since January economic activities showed a contraction of 0.70%, with sharp declines in manufacturing. In February, the scope of the Covid-19 in the global value chain had already compounded the situation, which worsened in March with the containment measures taken by the government to limit contagion, as well as the almost total halt of key sectors such as tourism due to global confinement.

Despite criticism for his economic recovery plan, AMLO announces further cuts

Thus, Q1 shows that the industry had a decline of 3.5%, while services fell 1.4%. Only the agricultural and livestock sector showed a positive variation of 1.2%, compared to the same period in 2019

According to the data published by the agency on Thursday, in contrast to the immediate previous quarter, the GDP had a decline of 1.6%. In this comparison, the industrial and service sector fell 1.4%, while the agricultural sector stagnated at 0.5%.

During his morning press conference, President Lopez Obrador said that these numbers show a lower decline than estimated by the market and insisted that a positive sign is that, in the first four months of this year, the Treasury recorded higher revenues.

However, he clarified: "We are not singing victory because the hardest part is yet to come", referring to the next quarter, and warned that it could extend to another quarter. It coincides with market expectations, which ensure that the second quarter of the year will be the one that will most severely suffer the effects of government measures to contain Coronavirus infections since in April and May the temporary closure of companies and the confinement of people intensified.

Under these scenarios, the market already estimates that the Mexican economy will close the year with a contraction between 6 and 7%, which doubles the pre-criteria established by Finance Secretary Arturo Herrera, who in April estimated a collapse of only 3.5%. In a context where it is expected that the world economy will suffer one of the strongest crises in history.

Yesterday it was announced that the U.S. economy contracted by 4.8% in the same period, its first plunge after 23 consecutive quarters of growth. For purposes of comparison with Mexico, it means a fall of 1.2%, in other words, Mexico was more affected.

Arturo Herrera, Secretary of Finance and Public Credit.

AMLO's strategy

In his conference from the National Palace, the president insists that he is optimistic, as he says that "the plan is already in place". According to López Obrador, the plan has the effect of a V: "Let the fall be of short duration". That, through strengthening the purchasing capacity and a boost to the industry.

But he also mentions the initiatives in Congress, such as the one he has already sent to Congress to adjust the budget and mentioned that there is another one that would allow the Finance Secretariat to concentrate government trust funds. "It is to concentrate all that so that the Treasury Department has all those additional resources," he said.

And despite his differences with the advice coming from the markets and the finance sector, he insists that the key is not to resort to debt, not to increase energy prices, but to strengthen his strategy of "Republican austerity", as well as to be stricter in the fight against corruption and the injection of resources through credits to micro, small and medium-sized companies.