GDP growth in second half of 2020 not enough to slow contraction in Mexican economy

By Aaron Humes: Despite 3.1 percent growth in gross domestic product from October to December, Belize’s northern neighbour Mexico saw its economy shrink by 8.5 percent overall in 2020 – its largest single year drop in 80 years and second successively, the Associated Press reports, citing preliminary data released Friday by the National Statistics and Geography Institute.

Mexico avoided double-digit contraction after a second trimester tumble of nearly 19 percent year on year, as the government of President Andrés Manuel López Obrador refused to take on additional debt to support businesses or subsidize consumers.

“The 2020 economic plunge is the reflection of not only the devastating effects of the virus pandemic but also the lack of preparedness and insufficient policy response of the current administration,” Alfredo Coutiño, director of Moody’s Analytics, wrote in his analysis Friday.

Part of the economy gradually began to open in June and the economy grew 12% in the third quarter, but remained 8.6% below the same period a year earlier. Much of the improvement had to do with U.S. economic activity picking up, Coutiño said.

López Obrador conceded Friday that the country was still 800,000 jobs short of the employment levels before the pandemic, but he said that “there are encouraging signs in the economy.”

The Mexican economy was already in a recession before the pandemic struck.

“The government’s decision of not implementing a rescue package to support businesses and mitigate the loss of employment took a heavy toll in terms of business mortality and well-being deterioration,” Coutiño said. Mexico ended 2020 with 840,000 fewer jobs than it had in February before the pandemic hit.

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