Instructions for reading GDP forecasts

The IMF says the Mexican economy will grow by 2.8% instead of 4% in 2022. It’s a cold water face, but we are not facing a prophecy written in stone by ‘ a Mayan priest or something by Nostradamus in his famous centuries. They are numbers that represent the picture of a moment and project it into the future. At the end of the year, the result may be better or worse.

Much of what happens in 2022 depends on what we do and what we stop doing. GDP growth will be worse if the electricity reform is approved in the terms proposed. In this case, the political profitability of the initiative is inversely proportional to its economic viability. GDP will be better, if Mexico manages to put itself on the map as a relevant player to attract investment that is now in China, what is our strategy to benefit from relocation? Does the president know this is the biggest opportunity in decades for the Mexican economy?

The IMF’s forecast is relevant because of the importance of the organization, but also because it coincides with other similar exercises conducted by private banks and other international institutions. The figures released by the experts are important, but so are the reasons they offer: the adjustment has to do with more unfavorable conditions in the international environment and also with internal factors that imply risk or hinder growth. In Mexico, investment is 14% below the level it had before the pandemic. Investments that have not been made in recent years will henceforth limit the possibilities for growth. Is it possible at this stage in the six-year term to erode investor confidence positively?

The predictions made by international organizations give much weight to the deterioration that the global environment has experienced in recent weeks. The United States and China will grow much less than previously thought. On the radar are factors that dragged us but were not resolved, such as the pandemic; of course the disruption of value chains, due to a lack of chips and containers. In the case of semiconductors, the solution is not at hand. The largest manufacturing companies in the world acknowledged this in front of investors on Thursday and collapsed with their main clients in the stock market.

Among the international factors entering the scene in 2022 are the sharpening of monetary policy in the United States and the geopolitical tensions in Ukraine. The rise in interest rates by the Fed is an expected response to curb inflation. It is a drug that will have side effects: it will put a brake on the US economy and cause volatility in many emerging countries. How much the exchange rate of the peso against the dollar will be affected is one of the questions. It will not continue at 20 pesos, but the magnitude of the jump it will hit is uncertain. The interest rate hike will also put pressure on government finances. An increase of one percentage point means hundreds of millions of dollars in increased debt service for companies that have been used as highly as Pemex and billions of pesos for the Mexican government. The end of zero rates in the United States will reduce the government’s room for maneuver. Pay attention to the role that rating agencies will play.

I wish it was just external problems holding back the Mexican economy. Public uncertainty and low levels of investment appear at the top of the list of adversity. High-profile crimes bring the glamor of the jewel in the tourist crown, Cancun. They also do damage to other regions and sectors that do not have as much light on them. Investor anemia is the symptom of serious problems: the government’s economic decisions give popularity points to the president, but subtract points from GDP; there is a mutual mistrust between the government and the private sector, leading to a great uproar over nothing. We need an economic policy that promotes growth and productive investment.

The decline in GDP forecasts for 2022 means that it is very likely that we will only return to 2018 levels in 2023. In economic terms, we are on track to have a lost term of six years. This is obviously not good news for the government, but neither is it for the opposition. For the 2024 election, we will have an impoverished and grumpy or depressed country, because a country that is not growing is a country that is suffering through the tragedy of not realizing its full potential. Who will be able to steer the ship between so many storms and pirates?

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Luis Miguel Gonzalez

General Editor-in-Chief of El Economista


Degree in Economics from the University of Guadalajara. He studied Master of Journalism in El País, at the Autonomous University of Madrid in 1994, and a specialization in economic journalism at Columbia University in New York. He was a reporter, business editor and editorial director of the Guadalajara newspaper PÚBLICO, and worked for the newspapers Siglo 21 and Milenio.

He specializes in economic journalism and investigative journalism, and has conducted professional residencies at Cinco Días in Madrid and San Antonio Express News, in San Antonio, Texas.

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