Market continues to improve Mexico's economic forecast: rules out a 10% drop
The Central Bank's survey reveals that specialists now predict a 9.4% drop this year, but also moderate projections for 2021.

After a wave of strong cuts on the growth of the Mexican economy, the market seems to have stopped its pessimism. The latest survey of the Central Bank (Banxico) confirms that now, the trend in the market is a downward adjustment, thus curbing the expectation that the economy will contract 10% or more, at the end of this year, despite the persistence of uncertainty due to the pandemic.

For October, the specialists consulted by the Central Bank considered that the economy will show a contraction of 9.44% at the closing of 2020, contrasting with its more pessimistic estimate in August, which foresaw a fall of 10%, while in September the average projection pointed to a collapse of 9.82%.

For that month, the market already showed these adjustments, as was the case of the International Monetary Fund (IMF), which also reduced its expectation of a fall to 9% for Mexico's Gross Domestic Product (GDP), a reduction of 1.5% with regards to the previous forecast, which was framed by a better perspective for the world economy.

Both analyses occurred before the performance of the Mexican economy was known for the third quarter of the year, which experienced a 12% growth by rebound, which positively surprised the markets. And while doubts persist as to whether this recovery will be sustained and continue in the following quarters, further downward adjustments are expected, aligning with the expectation that the economy will fall less than 10%.

Even so, these estimates, although closer, are still above the projections of the Secretary of Finance and Public Credit (SHCP), which is headed by Arturo Herrera, who estimates a far more positive drop of 8% for this year. What is certain is that these forecasts are subject to the continued control of infections, that there will be no new confinements and that a vaccine will be given all the necessary permissions in the short term.

On the other hand, Banxico's survey also moderated its expectations for 2021, with a slight downward adjustment, since they now consider that it could grow 3.21 and not 3.26%, but they estimate a reduction in inflation to 3.60% and an exchange rate that will be around 22.05 pesos per dollar for next year, from the 21.74 that they are expecting at the end of this year.

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