MEXICO CITY.— The Mexican economy is undergoing a phase of accelerated contraction, “similar to a train descending on a roller coaster,” and this fall will become more pronounced in the remainder of the year, so that GDP will only grow 1.5 percent in 2024 and 1 percent in 2025, estimated Alfredo Coutiño, in an article published yesterday by El Financiero.
The director for Latin America at Moody’s Analytics argues that the Mexican economy has reached the contraction phase of the political cycle when activity is affected by the end of political-electoral spending after the elections.
“The economy enjoyed an expansionary phase in the first half of the year, but is immersed in the downward phase of the roller coaster in the second half,” he stressed.
Key economic indicators are already reflecting some of the depressing effects of the electoral political cycle. While the economy grew 0.2 percent in the second quarter, slightly more than the 0.1 percent of the first quarter on an annualized basis, GDP grew only 1 percent after a 1.8 percent advance in the previous quarter and 3.5 percent in the same quarter of the previous year.
There is evidence that the Mexican economy is already in decline: as shown by some key indicators, the loss of economic momentum became noticeable in June compared to May, when campaign spending accelerated in the month before the elections.
The economic activity indicator showed monthly stagnation in June, after growing 0.7 percent in May; industrial production slowed to 0.4 percent from 0.7 percent in the previous month and retail sales plummeted in June, contracting 0.5 percent after growing 0.4 percent in May.
On the other hand, the labor market lost 29,600 jobs in June, with the cancellation of 34,700 temporary jobs standing out. However, the elimination of temporary jobs was slightly offset by the creation of 5,100 permanent positions.
Good first semester
The economist explained that in the first half of the year, the Mexican economy benefited from public spending to finance the electoral process, as well as from private contributions to political campaigns and public investment to complete government infrastructure projects, thus boosting activities related to the political-electoral process, especially construction.
The economy grew 2.2 percent in the first half of the year, driven by the expansionary phase of the political cycle, which has been present in the last year of every administration during the last four decades.
The contractionary phase of the political cycle began immediately after the elections in early June and will continue throughout the second half of the year.
This phase of economic decline begins just after the elections, when electoral spending disappears and public investment fades away.— EL FINANCIERO
Economy Factors
The absence of political and electoral spending directly affects several economic sectors.
Negative effects
Sectors such as printing and paper, communications and transport, accommodation, and food and beverages, among others, have been affected, as have construction activities. The effects are reflected in consumption and investment, but it also affects employment due to the cancellation of jobs created during the electoral process.
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2024-09-04 10:58:22
