Mexico Has Already Entered Into Recession, Says Bank Of America

Mexico City – For Bank of America-Merrill Lynch Mexico, it has already entered into a technical recession, and for a long time. This contraction state is defined when an economy registers two consecutive quarters of falls, and although the situation has not occurred in the country with the official Inegi figures on GDP, the brokerage maintains it using another series of data from the Institute itself .

This is the Global Economic Activity Indicator (IGAE) that is announced month by month – unlike GDP, whose data is quarterly -, and it turns out that with this the Mexican economy has already added three consecutive quarters of casualties, compared to their respective previous quarters.

The falls with this measurement were in the fourth quarter of 2018, with a variation of minus 0.25 percent; the first of 2019, with one of minus 0.14, and the second of 2019, with one of minus 0.18, all these movements with seasonally adjusted figures.

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Mexico has already entered into recession, says Bank of America | Photo: Reform

Thus, with this method of Bank of America-Merrill Lynch the country entered into a technical recession from the first quarter of the current year, when it added two falls to the thread, a situation that extended to the second quarter.

The third quarter of 2019 is not yet possible to determine with the IGAE, since the last available data is that of August.

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With the available GDP and IGAE data for the year, the investment bank reduced its expectation of growth in the Mexican economy, from 0.5 percent to 0.0 for all of 2019, and from 1.0 to 0.9 for 2020.

"Internal uncertainty has increased in part because governance and security appear to have deteriorated and monetary and fiscal policies remain strict," he says in his analysis.

He points out that a lower growth than previously expected opens the door to new losses at the target interest rate of Banxico, which has already cut it twice in recent months, at 0.25 points each, to leave it so far at 7.75 percent .

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Yesterday at the Seminar on Financial Stability and Central Banking, held in Mexico City, Alejandro Díaz de León, Governor of Banxico, said that Mexico's economy is stagnant and that it does not foresee that the losses made so far at the interest rate Help recovery.

"The state of economic activity has had a deceleration process and is in a stagnation stage," he said.

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This week the Inegi reported that Mexico's GDP fell 0.44 percent in the third quarter of the year compared to the same period of 2018.

Bank of America Merrill Lynch said the lower growth in Mexico also means that tax revenues will be lower than expected.

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