Mexican economy collapses 18.9% in the second quarter, its worst fall in history. The country’s Gross Domestic Product registered an unprecedented decline in the period from April to June, according to Inegi’s advanced indicator, in the context of the COVID-19 pandemic.
MEXICO (El Financiero) – The Mexican economy contracted 18.9 percent in the second quarter of the year, its worst decline in history, derived from the COVID-19 pandemic, according to the time estimate released Thursday by the National Institute of Statistics and Geography (Inegi).
This figure follows the 2.2 percent annual rate drop that Mexico’s economy had in the first three months of this year, and is the fifth consecutive contraction.
By activities, primary (agriculture, livestock, etc.) fell 0.3 percent from April to June, compared to the same period a year earlier; secondary (industry) fell 26 percent, and tertiary (services) fell 15.6 percent.
The estimate provided by Inegi is unlikely to change. The figures generated for the traditional quarterly GDP will be published on August 26, 2020.
The historic 18.9 percent annual decline is due to the pandemic’s effects, which had a very significant impact in April and May, the two full months of the shutdown of non-essential activities, and the generalization of containment measures in the country.
The closest drop to this Wednesday’s figure occurred in the second quarter of 1995 when the economy plummeted 8.6 percent in that year’s crisis.
The contraction of GDP in the second quarter of this year also exceeded the records of 2009, when Mexico suffered the effects of the global crisis and another pandemic: AH1N1 influenza.
At that time, the most significant annual decline was from April to June 2009, when the economy fell 7.7 percent.
The figure is in line with forecasts by financial institutions that warned of an unprecedented fall for the Mexican economy for the period covered by most of the National Distance Saving Day announced by the federal government to reduce the spread of the SARS-CoV-2 virus.
Citibanamex had predicted a contraction of 18.1 percent; Santander, 18 percent; Banorte, 19.5 percent, while HSBC estimated a fall of 20.5 percent.
On the other hand, the forecast of Gerardo Esquivel, deputy governor of the Bank of Mexico, was a drop of between 19 and 20 percent a year for the second quarter of 2020.
The ‘signs’ of this contraction were ‘anticipated’ by updates of the Global Index of Economic Activity in Mexico (IGAE), which in April and May reported historical declines of 19.6 and 21.6 percent annually according to Inegi.
What was the history of Mexico (and the COVID-19 pandemic) between April and June?
In the second quarter of 2020, thousands of small family businesses and companies had to stop their activities because of the National Distance Healing Day.
This strategy, which was in effect from March 23 to May 30, established that only those activities considered essential -such as food sales at home, supermarkets, and health sector jobs- could continue their operations.
The federal government reported that from June 1, Mexico would enter the so-called ‘new normal’ phase, under which each state could restart certain activities according to the state of the COVID-19 risk light.
With this ‘new normality,’ construction, mining, and manufacturing of transportation equipment were considered essential activities, allowing their operational return.
As a result of the pandemic, Mexico has experienced significant job losses in both the formal and informal sectors.
In the case of jobs registered with the Mexican Social Security Institute (IMSS), the effects of the COVID-19 pandemic were responsible for the loss of 1’113,677 formal jobs in the first half of this year.
Between March and May, months included in the National Day of Healthy Distance, 1’30,366 jobs were eliminated. Already in June, the first month of the ‘new normal,’ the loss in this indicator was only 83,311 formal jobs.
Although adding other types of jobs, such as public or informal, the loss of employment soars. Jonathan Heath, deputy governor of Banxico, said earlier this month that the number of jobs eliminated in April and May was more than 12 million, according to Inegi data.
Using data from Inegi and the IMSS, the Central Bank drew up a table detailing that 3.72 million formal jobs and 8.46 million informal jobs were lost in those months.
In this regard, López Obrador said that so far in July, only 30,000 jobs had been lost in the formal sector. He even ruled out that in the week that began July 20, no jobs were eliminated.
“I want to close the month without job losses so that in August we can begin to rehire workers and start the recovery because I have said that this crisis has to be like a ‘V’: fall and rise,” he said during his visit to Salina Cruz, Oaxaca.
Quarterly comparison
The GDP fell 17.3 percent in the second quarter of the year, compared to the first quarter, according to figures published by Inegi. The decline, also unprecedented, is the sixth consecutive contraction of the Mexican economy. By activity, primarily sector fell 2.5 percent, secondary sector 23.6 percent, and tertiary sector 14.5 percent.
