2010 Mexico’s GDP: recovery and current situation

I published this article on Plaza de Armas, newspaper from Queretaro, January 24^th 2011 (http://www.plazadearmas.com.mx/)

During December and January there have been different estimates about the economic growth for Mexico during 2010. These goes from 5% to 5.4%, all of them are figures that exceed the previous forecasts from different organizations.

Definitely, a year with this growth rate will always be good news; but it is also important to put it in context to clearly understand the country’s situation. According to INEGI, 2010 3^rdQ is still a little below the level we had prior to the world economic crisis (2008 1^stQ). That means we are just reaching the point we were three years ago!

 

Elaborated with data from INEGI

Base 100=2008 1st Q

This information could make us believe that 3 years later, we have finally overcome the economic crisis pot hole. However, let’s consider that although the production level is the same, we are now more Mexicans than 3 years ago (2 millions more according to INEGI). As a result, the GDP per capita of 2010 is still 2.8% below the 2008 1^stQ. The GDP per capita is used as a proxy for wages in a country; therefore, according to this perspective, we are still living the effects of the 2008 crisis.

¿What expectations are for 2011? Forecasts are that the growth will be between 3.6% and 4.8%. If forecasts come true, we will recover the same GDP per capita sometime during 2011.

Institution	2011 Forecast
CEPAL	Above 3.5%
World Bank	3.6%
Ministry of Economy	4%
UBS Brokerage	4.3%
Banamex	4.8%

We are having a positive perspective. True, the crisis will have 3.5 to 4 years to have a complete recovery if we consider the indicator of GDP per capita, but it is good to know that the fears of a double-dip have disappeared.

Mexico’s challenges are still on different areas: a weak domestic market; a huge exports concentration in the United States; the existence of different economic sectors with production levels below those of 2008; insecurity and its effect on the economy; financial and fiscal risks on different countries; uncertainty regarding the currency policies from emerging markets, etc. However, it is important to plan over the positive perspectives, and keep a track of these risks to respond opportunely. I agree with a statement from the United States Chamber of Commerce, let’s be “cautiously optimistic” and begin to design our companies’ strategies according to these encouraging scenarios.