IMF forecasts 6.6% economic contraction for Mexico due to coronavirus crisis

IMF forecasts 6.6% contraction for Mexico due to coronavirus crisis
A man wearing a mask stands in front of a stock market indicator board - Photo: Frank Robichon/EFE
English 14/04/2020 19:56 Leonor Flores Mexico City Actualizada 20:30

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In 2020, Mexico’s economy will shrink by 6.6%, as estimated by the International Monetary Fund (IMF), due to the effects of the COVID-19 coronavirus and lower oil prices.

This contraction is almost twice as forecast by the finance organism during the 2009 crisis that forecast a 3.7% fall after a downward trend adjustment of 3.4 percentage points.

In the report of World Economic Outlook (WEO) published on April 14, the IMF added that the new outlook for 2020 implies a 7.6 percentage points cut in comparison to the 1% advance it had in January.

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After the pandemic, the IMF considers the Mexican economy could have an opportunity to expand in 2021 by 3%  from last January’s 1.60%

The WEO, which was published today in the eve of the virtual Spring meeting of the IMF and the World Bank, alerted that, just as with the size of the current recession, there is extreme uncertainty regarding how strongly the global economy will recover.

The latter is due to the pandemic potentially being more persistent than expected, the IMF said,

It stressed that although the disease has focused mostly on developed economies, new outbreaks in developing countries or economies could further hinder the global recovery and it would imply longer traveling obstacles.

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This occasion, the IMF did not include a broad report country by country since the complete report will be published in May.

For the global economy, the IMF is forecasting a 3% fall, which is 6.3 percentage points less than the previous forecast; for 2021, it is considering a 5.8% recovery.

In April 2009, the IMF had forecast a global contraction of 1.3% which involved a wide margin during the deepest depression since World War II.

The IMF asserted that all developing countries are facing a health crisis, a severe shock from foreign demand, a dramatic toughening of global financial conditions, and a collapse in basic product prices.

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Given the high level of uncertainty about what will happen with the evolution of the new coronavirus, the IMF presented three possible future scenarios.

The first one is based on the pandemic lasting longer than expected and hence the containment measures being implemented for approximately 50% more than all countries’ baseline.

The second present a second milder outbreak in 2021.

Lastly, the third one takes into account a longer pandemic and tougher containment measures in 2020 as well as a second outbreak in 2021.

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