Bank of America Merrill Lynch said that Mexico is in a technical recession. The organization issued an analysis entitled: Emerging Insight: Is Mexico in a Technical Recession?, where the Bank explains that several economic indicators are down from last year, showing that the country entered into a technical recession because the economy growth has been reduced to the lowest point in years.
Although there is controversy about what a recession implies, the consensus indicates that it occurs when the GDP decreases during two consecutive quarters of the year.
According to the INEGI (the National Institute of Statistics and Geography), the GDP of the third quarter of 2018 represented a growth of 0.7%, compared to the previous one, while the first quarter of 2019 had an accumulated decrease of 0.9%. So far, the Institute has not issued the exact figure of the decrease during the second quarter, but Bank of America predicts a subtraction of GDP with the value of 0.4% during this period. Compared to last year, GDP has only grown 0.1%.
The Bank estimates it according to the changes that GDP has had, which is measured by the sum of consumption, investment, public spending and exports, based on spending. According to the INEGI, private consumption grew up 0.2%, Foreign Direct Investment recovered 0.5% of his value, while public consumption grew up 0.8%, but public spending fell 0.3% and exports fell 0.2%.
The data is opposed. In the short term, the economy seems to recover slowly, but it is not enough to end the economic decrease accumulated for years. In doubt, it would be better to hear the warning of Jonathan Heat, vicegovernor of the Bank of Mexico: we need to wait six months to be able to act correctly.
Two factors that modify the figures must be taken into account:
The first is that the world economy is in a continuous slowdown. The IMF foresees that it will mark a very long time.
The second thing to take into account are the pressures of the main trading partner of Mexico, the United States.
Both factors, added to the usual deceleration due to the change of government, make it impossible to confirm the Bank of America’s commitment.
