Thursday, July 30, 2020

Fitch worsens economic forecast for Mexico; expects 7.4% contraction

The firm noted that the nation is one of the most affected by the coronavirus pandemic.

The rating agency Fitch Ratings announced on Tuesday its estimate for the Mexican economy during 2020, where it expects a contraction of 7.4 percent at the annual rate. This is an adjustment from its previous forecast, where it estimated a drop of 6.6 percent. “The sheer magnitude of the shock related to the blockade on global activity has now begun to reveal itself in hard macroeconomic data. No fewer than 17 of Fitch’s 20 countries have reported, or are expected to report, economic contractions in 1Q20, and all but China will see GDP decline in 2Q20. Fitch estimates that world GDP fell 3.4 percent quarter-on-quarter in 1Q20 and predicts that it will decline 5.8 percent in 2Q20, simply unimaginable figures before the pandemic. This year’s global recession will be more than twice as severe as in 2009” they commented.

Of the 20 nations analyzed by the rating agency, Mexico ranks fifth, behind only Spain, Italy, France and the United Kingdom, which will see contractions of more than 7.8 percent in their economies this year. On the other hand, for the second quarter of this year they expect Mexico to have a fall of 9.6 percent compared to the previous quarter and a contraction of 11.2 percent compared to the same period of a year earlier, with which the agency reflects that Mexico will also be among the most affected nations in the second quarter.

For Gross Fixed Investment, Fitch Ratings expects that at the end of 2020 it will drop 15.3 percent, which would accelerate the fall seen in 2019, which was 4.9 percent. Regarding monetary policy, the rating agency expects the Bank of Mexico (Banxico) to close this year with an interest rate of 4.7 percent, due to the projection of inflation of 3 percent at the end of 2020, in addition to a type of exchange of 22 pesos for dollar.

Source: El Financiero

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