Mexico’s GDP in perspective

The timely data on GDP growth for the third quarter raised voices of optimism as it was higher than expected. The real annual percentage change for the first nine months of 2022 was 2.7%. The greater boost was mainly due to a better-than-anticipated performance in exports and in foreign direct investment due to various nearshoring projects, especially in the north of the country. However, there are doubts that this rate can be maintained in the fourth quarter, especially if private investment and consumption contribute significantly to the dynamism.

Even if the GDP expansion in 2022 is 2.4%, this, added to the growth of 2021 of 4.8%, will still not be enough to compensate for the fall of the 2020 recession of 8.1%. And the worst thing is that the expectation for 2023 is very low growth, perhaps close to 1.0%. This does not leave much optimism for 2024 either. Everything indicates that the average annual growth of the six-year term will be a meager 0.6% without even recovering in 2024 the level of per capita income of 2018.

Evaporated were López Obrador’s campaign promises that the first four years of the six-year term the average annual growth would be 4% and during the last two the economy would expand at 6% per year. It is clear that at the time of making those promises, it was evidently not expected that in 2020 there would be a recession due to the pandemic. But this worsened due to a lousy economic management of not providing temporary fiscal support to mitigate the contraction, as practically all the countries did.

Comparatively among the economies of Latin America and the Caribbean, Mexico has had one of the worst performances. Jesús Cervantes, from CEMLA, brought to my attention the cumulative GDP figures for 2019-2021 for 22 economies in the region. The data shows the setback that Mexico has suffered. Of the aforementioned sample of 22 countries, 11 had positive growth in the mentioned period and 11 negative. The cumulative drop in GDP in Mexico was 1.3%, occupying 17th place. In contrast, Guatemala occupies the first place (+3.4%) and the remaining four Central American countries registered positions from 5 to 8 with growth ranging from +1.9% to +1.4%. Within the segment of the 11 countries with negative GDP, including Argentina and Bolivia had less pronounced falls than those of our country. If Mexico is compared with one of the poorest economies in the region such as Haiti, its 2.3% drop is not very far from that of Mexico. Obviously, all the countries applied countercyclical policies in the face of the pandemic that caused their growth to bounce back significantly in 2021. This is the difference that explains why Mexico stands out in the Latin American and Caribbean region with one of the poorest results in its economic growth.

It is not expected that this relative position of Mexico will change substantively in 2022, since relativity will continue since most countries will have expansions. The fact is that Mexico has extinguished the economic leadership that it traditionally held in the region.

@frubli