Economic Slowdown in Mexico “Is Just Around the Corner” due to Earthquakes, Experts Say

“The slowdown is just around the corner,” the banks said in a report, adding that the growth of the country’s Gross Domestic Product will reach 1.9 percent when it had previously stood at 2.1. (Flickr)

EspañolThe two earthquakes that struck Mexico in 2017 will have a negative effect on its overall growth, according to Bank of America and Merrill Lynch.

“The slowdown is just around the corner,” the banks said in a report, adding that the growth of the country’s Gross Domestic Product will reach 1.9 percent when predictions had previously stood at 2.1, according to Carlos Capistrán, chief economist for the Canadian and Mexican Bank of America offices.

“The impact on the economy of the second earthquake is greater, though (the actual earthquake) was smaller,” the report said. “The contraction in September due to earthquakes along with the contraction of the IGAE in July, led us to reduce our expectation of annual GDP growth below two percent.”

The first earthquake occurred on September 7, affecting the states of Oaxaca, Tabasco and Chiapas, which represent 6.4 percent of the country’s economy. A second earthquake occurred on September 19, which affected Mexico City, Puebla, Morelos and the State of Mexico, where 30 percent of GDP is concentrated.

According to Capistrán, President Enrique Peña Nieto can use one percent of GDP for reconstruction and the support of victims, and still have a primary surplus for the remainder of his administration. “We believe that these resources will have a positive impact on the economy during the last quarter of 2017 and the first half of 2018. Fiscal support led us to increase our GDP growth forecast for 2018 to 1.6 percent from 1.3 percent.”

Bank of America officials said they expect a slowdown in Mexico’s economy, however. Additionally, officials said they expect the Central Bank of Mexico to make significant cuts, motivated by the slowdown in economic activity and inflation.

Source: Forbes México.

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