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Recovery in Mexico is subject to measures to support individuals and companies – Agence SEO – Latest News, Breaking News, Top News Headlines

He Mexico’s economic rebound projected for this year is 3.5 percent, after a drop of 8.8 percent in 2020, but the Recovery will largely depend on the spending decisions made by the government, he said. Ariane Ortiz-Bollin, VP-Senior Analyst at Moody’s.

At a press conference, the sovereign risk analyst considered that the use of debt is positive if economic growth is promoted, so government spending should be focused on support such as guarantees to companies, in addition to betting on the public investment.

« The economic recovery of 2021 It will have more to do with the government’s spending decisions to reactivate the economy, whether with public investment, with guarantees for companies, with supplements such as cash transfers to the people, ”said the specialist and indicated that the countries that implemented these measures you will see faster economic recovery.

“The fact that in Mexico this has not occurred (granting of support), we think that it is contributing to the economic recovery is weaker than the one that will be in other countries, « he said.

Ortiz-Bollin highlighted that last year the government did not spend so as not to increase the debt ratio as a percentage of Gross Domestic Product (GDP), however, that affected the economic growth of the country.

« It has a credit value that the government has not spent, because if it is less spending it implies less debt, but in this context we believe that this decision is affecting growth in a way that in the end can be a net negative, » he explained.

He emphasized that last year Mexico allocated about 1.1 percent as a percentage of GDP to support, being one of the nations that granted the least stimulus.

Moody’s specialist noted that the country’s recovery will be slow, due to the low dynamics of productive investment since the end of 2018, in addition to the austerity policy of the current administration.

“There are many reasons why Mexico is going to grow slower than other countries, but the two main ones are: first the investmentBoth the government and the private sector have fallen since the end of 2018, and by 2020 we estimate that it will have fallen almost 20 percent compared to 2019. The other explanation is because the Mexican government decided not to spend so much like the rest of other countries, « he said.

In its report, the rating agency noted that the decisions of the new administration they have fundamentally altered the confidence of entrepreneurs and they will likely affect private investment for years.

« The de facto reversal of energy sector reform of the previous administration, for example, is limiting growth prospects in that sector, ”he said.

He added that a recent proposal in the Senate to modify the central bank law added to these risks that affect business confidence.

The firm estimates that investment will remain depressed at current levels of 17 percent of GDP in the next 2 to 3 years.

« Therefore, it is unlikely that Mexico will achieve a capital deepening process that will help drive GDP growth in the coming years. »

The firm estimates that it would not be until 2023 when it would return to the GDP levels seen in 2019.

On the other hand, Moody’s warned that recurring support for Pemex it could affect the fiscal soundness of Mexico.

“The continuous deterioration of Pemex’s financial situation and operating position will affect the sovereign’s fiscal soundness, given the need for substantial and recurring support. Supporting Pemex in 2021 could cost the sovereign as much as 14.7 billion dollars or 1.4 percent of GDP, « he concluded.

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