What is a technical recession ?; Did Mexico enter one in the fourth quarter of 2021?

An economy is in technical recession when national GDP (Gross Domestic Product) contractions are recorded for two consecutive quarters.

Some economists and institutions use the concept of technical recession to describe an early phenomenon that indicates a general stagnation or slowdown in economic activity.

However, the concept should not be used universally and should be supplemented with the analysis of other macroeconomic indicators, such as the work, the price level, the consumption internally, the ability to pay of economic agents and the level of production.

Furthermore, a technical recession is not the same as an economic crisis. An economic crisis represents a slowdown in economic growth and also implies pronounced financial instability with negative consequences at macro- and micro-economic levels. In turn, a technical recession is about minor contractions that are possible to correct through economic policy, public spending and other resources.

In Mexico, during the fourth quarter of 2020, the economy recorded a 0.1% decline compared to the previous quarter, as reported by the Inegi (National Institute of Statistics and Geography) in its timely estimate yet to be confirmed.

This would imply two consecutive contractions and would meet the first characteristic of a recession; Despite this, it will still be necessary to observe the behavior of the rest of the indicators and especially the interpretation of the trends that are in control of the Business Cycle Appointments Committee.

On the other hand, the timely figures published by the Inegi show that the economic reactivation of 2021 will achieve a recovery of 5%, which is within the projected projections, but which is insufficient to compensate for the decline of 8.2 % registered in 2020.


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