Mexico’s economic outlook for 2020

06/01/2020
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09:10
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Mexico’s economic outlook for 2020
The way in which governments spend public resources can contribute to spark an economic crisis - Photo: Edgard Garrido/REUTERS

Mexico’s economic outlook for 2020

06/01/2020
09:10
Mexico City
Editorial
-A +A
Mexico’s debt reached its peak during the administration led by Enrique Peña Nieto

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The way in which governments spend public resources can contribute to spark an economic crisis, to promote economic growth, or generate a paralysis. Mexico has had governments, especially in the 70s, that started a money factory, squandered money, or became indebted and derailed the national finances. There have been other administrations that had a prudent management of public resources, which turned into economic growth.

During the administration led by Enrique Peña Nieto, Mexico’s debt reached its peak, as the proportion of the gross domestic product. The current government has committed to maintaining healthy finances and to avoid increasing the country’s debt, which translates into positive comments from analysts and international organizations. Despite this, economic growth in 2020 will be almost null or slightly negative, in contrast with 2019.

How will Mexico overcome a mild recession?

One of the most common critics against the current administration was its expenditure restraint as it took a long time to allocate the resources or were not used. In November 2019, there was an under-spending of MXN $150,000 million. For 2020, the goal is to accelerate the rhythm of public expenditure. Experts consider that public expenditure can contribute to economic growth by 0.5%.

Nevertheless, this is only one of the requirements needed to boost economic growth. Others are not linked to internal decisions but to international scenarios. For example, the oil price has increased as a result of the conflict between Iran and the U.S.

Mexico entered a mild recession in 2019

But there are other factors that exclusively depend on what is or what isn’t done in Mexico. One of the is to generate trust among investors or to guarantee the rule of law: to have the certainty that the law applies to all and that authorities won’t ask for bribes from those who start a business.

As everyone knows, a healthy economy is essential for the country’s development. In 2020, the federal government won’t repeat its under-spending of public resources; this is important but it should be followed by other actions to improve the Mexican economy.

Mexico unveils its 2020 budget 

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