Monday, February 26

The Mexican economy is still ‘sick’ with the pandemic, according to specialists

The recovery of the Mexican economy will continue during 2022, but will continue limited by supply shocks, which are being caused by the pandemic, estimated the Undersecretary of Finance, Gabriel Yorio.

He highlighted that in a very specific way, the costs of maritime transport have increased 10 times more prior to the pandemic, likewise, interruptions are being seen in value chains that have more permanent impacts, such as that of microprocessors that affected the automotive industry. in Mexico.

“Obviously we are also observing the different COVID variables that have generated waves of infections, although deaths have not increased, but this has been generating impacts on the global supply side and in Mexico”, he stressed.

We have observed that mobility in some states has decreased in some states due to these waves of Covid infections.

“In such a way that we are going to see a recovery that is going to be limited by these supply shocks,” he stressed.

When presenting the Reports on the Economic Situation, Public Finances and Public Debt for the fourth quarter of 2021, the official highlighted that Mexico ended 2021 with robust public finances, macroeconomic and financial stability and public debt at sustainable levels.

John Soldevilla, director de Economy, Business & Indicators (EcoBi), He stressed that “the stagnation that the economy has been showing since November, when the IGAE barely grew 0.3 percent annually, means that the rebound has run out and now the economy is going through a horizontal or lateral stage, that is, without progress.”

“The pandemic continues to be the main limitation to growth, and as long as a solution to this problem is not seen, we will have a perverse combination of inflation and stagnation,” he lamented.

Pablo López Sarabia, academic at Tec de Monterrey, He emphasized that in addition to supply shocks, another limitation to growth will be the monetary restriction, since it is expected that the Bank of Mexico will continue to raise the interest rate.

Yorio rejected that Mexico is experiencing a period of stagflation, defined as a combination of economic recession with high inflation, pointing out that for this to happen a set of negative indicators is required and not just a drop in GDP for two consecutive quarters, but high unemployment, among other variables, and in Mexico employment is recovering.

Soldevilla explained that “when the economy drops for two consecutive quarters, it is said that technically we are in a recession, but if the falls are minimal, I think there is no such thing, rather we are in a pause. The recession consists of generalized drops in the economy, in addition to employment and other indicators being strongly disordered; Let’s better talk about an economy with horizontal growth”, he stressed.

Robust public finances in 2021

The Undersecretary of Finance highlighted that Mexico ended 2021 with robust public finances, macroeconomic and financial stability, and public debt at sustainable levels.

In terms of public finances, public sector budget revenue they amounted to 5 billion 960 thousand 910 million pesos, higher by 421 thousand 964 million pesos compared to the program, and exhibited a real annual growth of 5.6 percent compared to what was observed at the end of 2020.

The total net expenditure of the public sector It was located at 6 billion 738 thousand 854 million pesos, an amount higher than what was approved in 481 thousand 714 million pesos and higher than what was observed in 2020 in 6.4 real percent.

spending on social development it amounted to 3 billion 71 thousand 333 million pesos, 85 thousand 694 million pesos above the scheduled amount, and represented 59.9 percent of programmable spending.

The non-programmable expense It was lower than the program by 67 thousand 112 million pesos, mainly as a result of lower payments for financial cost in 36 thousand 897 million pesos, as well as from Adefas and others lower than what was scheduled in 25 thousand 133 million pesos.

budget deficit reached 757 thousand 790 million pesos, equivalent to 2.9 percent of the GDP originally proposed in the 2021 Economic Package. The legal goal approved for the year was met, as well as the debt ceiling approved by the H. Congress of the Union.

For its part, the Financial Requirements of the Public Sector (RFSP), the broadest measure of the deficit, totaled 996 thousand 661 million pesos or 3.8 percent of GDP, a figure lower than the projection presented in the Report corresponding to the third quarter of 2021 and which contributed to the reduction of the debt.

The net debt of the Federal Government stood at 10 billion 395 thousand 86.6 million pesos, equivalent to 39.7 percent of GDP, and maintained a solid structure, with 77.7 percent denominated in pesos and 78.2 percent contracted at a fixed rate and with long maturities. term. For its part, the Historical Balance of the Financial Requirements of the Public Sector, the broadest measure of debt, amounted to 13 billion 114 thousand 784.1 million pesos, a figure equivalent to 50.1 percent of GDP. This result compares favorably with the level of 51.7 percent of GDP observed at the end of 2020 and with the estimate of 51 percent of GDP published in the General Criteria for Economic Policy 2022.