Mexico's Economy Declined by 0.14% Last Year

Mexico's economy contracted 0.14 percent in 2019, according to the figures released recently by the National Institute of Statistics and Geography (INEGI).

In an article by Mexico Business,  registered a 0.4 percent contraction in Q4 last year, the sharpest fall in 2019. While the country's economy did not decline in the Q1 and rose by 0.1 percent in Q2, contraction began in Q3 at 0.2 percent. With the GDP drop in last year's fourth period, the country registered two consecutive quarters of economic contraction, thus meeting the technical definition of a recession.

"You don't need a Committee to define if last year there was a recession. Classifying it as a recession or stagnation does not change reality," Moody's Analytics consulting director Alfredo Coutiño said in an interview by El Economista. The specialist warned that the definition of recession is irrelevant when data disclosed by INEGI show that private consumption, encouraged by government transfers and remittances, was the only factor that limited a deeper decline during 2019.

In January 2019 INEGI and analysts have already projected the contraction, the first one since the 2009 global economic crisis.

According to the data released by INEGI, industrial sector (or secondary activities) registered an annual drop of 1.9 percent. This decline could be attributed to the 5.1 percent plunge in mining. It was only in the October-December period of 2019 that the industrial sector registered a negative variation. The 1.2 percent decline registered on the previous quarter was triggered by poor automotive industry results and a slow-paced construction sector. This was the fifth negative consecutive quarter result for the industrial sector.

It can be recalled that in November, Mexico President Andres Manuel Lopez Obrador claimed the economy is doing 'very well,' despite the economic challenges currently plaguing the country. Obrador said that the only reason why economic growth in the country is slow is because the Mexican government is not no longer "spending to spend."

When left-wing politician took over the leadership in December 2018, he had promised the people of Mexico to improve the economic growth of the country to 4% more or less every year.

In the same month, the Mexican government entered into a public-private partnership to boost the declining economy. Said partnership has allotted $42.95 billion for the infrastructure plan.

In a previous report by Latin Post, Obrador  said that the private sector will fund around 80 percent of the National Infrastructure Plan (PNI), the first phase of which includes 147 projects: 45 in Central Mexico, 49 in the north, and 42 in the south. Meanwhile, the remaining 11 projects will be distributed across the country.

In a report from Mexico Daily News, Obrador said "The plan is basically with private investment. This is important because the participation of the private sector is needed for the economic growth of the country and public investment is important but it functions as seed capital to trigger growth with the participation of the private sector."  

Carlos Salazar, President of Business Coordinating Council said that first phase of PNI will be allocated in building highways, energy, tourism, water, and sanitation infrastructure.

The infrastructure plan is expected to boost Mexico's economy by creating more jobs and helping the country compete with other developing countries.