The Yucatan economy’s main sectors experienced a dramatic collapse in the first six months of the year due to the Covid-19 pandemic, says an official state government report.
MERIDA Yucatan (Central 9) – More than 20,000 formal jobs have been lost in the State of Yucatan so far. Income from tourism and commerce, the State’s major job generators, has been severely reduced.
In the trade sector, authorities expect a slow and challenging recovery in the coming months due to rising unemployment and the fall in the population’s purchasing power. Likewise, public resources also declined sharply.
Low revenues and GDP
According to the Quarterly Report on Public Finance April-June 2020, state tax revenues fell 67.9%, and federal shares to the State fell 572.3 million pesos. In this aspect, it is expected that at the end of the year, the decrease reaches 1.5 billion pesos.
For the first time in several years, the Gross Domestic Product (GDP) of Yucatan experienced a fall. It was 0.8% in January compared to the previous quarter, when it registered a negative growth of 0.62%. (In 2018 GDP growth amounted to 3.7%).
According to the Quarterly Report, as a result of the collapse of economic activity, in the first six months of the year, 19,007 jobs were lost, representing a decrease of -321.5% over the 8,579 jobs generated in the same period in 2019.
Of these jobs lost, 5,412 corresponded to women (28.5%) and 13,595 to men (71.5%). The sectors most affected by unemployment were the construction industry, with 5,953 jobs lost, followed by the service sector for companies, individuals, and households, with a loss of 5,854 jobs, and the processing industry, with 4,633 dismissals. Although the report does not give figures on unemployment in the informal sector, it does say that “during the first quarter of 2020 the rate of informality in the State registered a value of 58%”.
The document adds that the repercussions of the contingency on the economy are not restricted to the labor field and highlight that the tourism sector is one of the most affected, derived from the closing of borders between countries and the cancellation of massive events.
Impact on hotels and tourism. During the first five months of the year, overnight tourist arrivals fell by 48.6% compared to the same period last year.
According to the report, this had a direct impact on hotel occupancy, which recorded 27.9% occupancy, a value that decreased 29.1 percentage points over the previous year. Since March, not a single cruise ship arrives in Yucatan, by the Covid-19. There was also a decrease in the number of visitors by sea. The number of cruise ships that arrived in Progreso, with data from June, decreased -31.3%, and in particular, there was no single cruise ship arrival in March. This implied a decrease of -42.3% in the number of passengers compared to 2019.
In the same vein, the arrival of air passengers recorded a decrease of 46.8%, although, in June, the report indicates a slight recovery with an increase of 122% passengers compared to May.
A decrease in visits to archaeological sites
The arrival of visitors to the State’s archeological zones, one of the main tourist attractions, was also affected by the contingency measures.
During the period from January to May, the arrival of national and international tourists to these sites registered a decrease of 41.2%
As for the commercial sector, the Quarterly Report states that as a result of the Covid-19 pandemic, “it registered a change in its natural cyclical trend of growth during the year.
The companies in this sector showed a decrease in the income generated. The wholesale trade was the most affected by the contingency by presenting a decline of 9% in its revenue compared to the same period of the previous year. Retail trade, on the other hand, experienced a decrease in its income of 3.8%.
Negative outlook for trade
The report stresses that “the outlook for the trade sector is negative since although the results presented as of May show a negative difference concerning income in 2019. It is expected that this gap will become even higher due to the reduction in purchasing power, resulting from unemployment, the decrease in the number of visitors to the entity, and the decrease in the number of companies created.
In this regard, the report states that, according to the Secretariat of Economy’s Integral Registry Management System, “the number of companies created during the second quarter of 2020 was 181.
Income generated by trade also fell. “This meant a decrease of -41.2% compared to the same quarter of 2019 and a decrease of -40.3% compared to the previous quarter.
Construction Industry
Concerning the construction industry, the document states that it registered an accumulated growth of -3.2% to March compared to the same period in 2019.
Precisely, in the housing sector, in the period from January to May, according to the National Housing Commission, in Yucatan were executed 301, 559 financing actions, so it recorded a decrease of -21.6% period last year.
However, during this period, an amount of 141,014 billion pesos was delivered, which meant an increase of 1% over the same period in 2019.
In the case of accumulated agricultural production, it amounted, according to preliminary figures, to 104,405 tons, representing a decrease of -4.9% over the same period in 2019.
Another sector affected by a pandemic is exports. It registered a value of 236.03 million dollars during the first quarter, which meant a decrease of -0.9% over the same period in 2019 when it recorded an amount of 238.11 million dollars.
In this period, the primary sub-sector of exports from Yucatan was the manufacture of transport equipment, with a value of 73.8 million dollars, representing 31.3% of total export value and a growth of 3.2% over the same quarter of 2019. The garment manufacturing subsector is followed by a representation of 29.9%, by registering a value of 70.6 million dollars and a decrease of -0.2% over the same quarter of 2019.
Investment also decreases
In the same period, Foreign Direct Investment registered a decrease of -16.5% concerning the same period of 2019 due to a significant reduction in the “reinvestment of profits” item and being the “new investments” item the main growth factor. The sub-sectors that registered the highest investment concerning the total period were credit and non-bank financial intermediation institutions (29.4%), retail trade-in self-service and department stores (13%), and the food industry (10.7%).
The countries that invested most in the entity were the United States (71.4%), Spain (17.4%), and Canada (4.7%).
Decrease in tax revenues
As stated at the beginning of this report, the economic situation of the State is complicated by the decline in government tax revenues.
According to the Quarterly Report, the economic stoppage generated by the Covid-19 health emergency affected local collection through lower duties and taxes and the postponement of various financial obligations.
Due to this, during the second quarter of 2020, the collection was 915 million pesos less than the estimated in the Law of State Revenue 2020 (67.9%), which amounted to 1,348 million pesos.
Regarding the transfers from the Federal Government to the State, the report says that the second quarter had a reduction of 572.3 million pesos compared to the estimated in the Revenue Law (-23.7%). In this sense, according to the document, the Secretariat of Finance and Public Credit estimates that the decrease in holdings for Yucatan in 2020 will be equivalent to approximately 1.5 billion pesos.
