Mexico’s recession defies growth predictions. Here’s why

As we all know, recessions are challenging for many people from businesses and consumers alike.

In 2019, Mexico’s economy officially entered a recession, at least according to preliminary fourth-quarter data that was released by the country while Mexico was hoping that its economy would grow at least two percent. In the first year of President Andres Manuel Lopez Obrador’s, but instead, it rose 0.1 percent in the first part of the year.

Many think that that the damage was done because of uncertainty that was introduced by the government’s actions and less of the external factors. When things are completed out of fear, it is something that we can see that would cause a recession.

In 2019 the economy was functioning under the strict monetary policy, which, together with a volatile external environment, would be limiting its performance. For those who are unaware, a recession is usually defined by economists as two consecutive quarters of contraction in gross domestic products.

Some of the big reasons for the fall are investors confidence in Mexico has been shaken by the number of policy moves made by Obrador. One, in particular, is his decision to cancel a partly built $13 Billion airport for Mexico City and his retreat from the previous government’s opening of the oil and gas industry to private capital. Many are questioning his economic management and his long term plan with it.

As Mexico is working on getting out of the recession, they are in. Many hope that President Obrador is going to make the necessary changes to policies and work on uniting things and instilling the confidence back into investors.

Some of Mexico’s growth has to do with the high dependence on the US business cycle, with real GDP contracting almost 6% in 2019 and around 5% entering 2020. So when looking at the bigger picture, it could easily be the third quarter of 2020 before Mexico sees relief out of the recession they are currently experiencing.

With the economy failing to expand so far in 2020, the hope of it expanding it. It’s a very disappointing downward revision from the first estimate; they will stay under pressure to try and start the second half of 2020 strong and turn things around.