Mexican economy in recession, economists say

Mexico's unemployment rate has risen and stands at 5.2 per cent.

Mexican economy in recession, economists say

World Bulletin / News Desk

The Mexican economy has entered into a recession according to technical measures and definitions used by the Mexican-based National Institute of Statistics and Geography.

The institute considers not only whether the coincident indicator is located in a recessionary phase, but also if is at least nine months since the downturn began and there is at least 21 months between the current and the previous peak in the indicator.

So while the economy is growing, albeit slowly, it is not enough to consider the economy is in expansion mode. Indeed, the economy posted growth of just 1.1 percent in 2013 alongside a rise in the unemployment rate.

And experts in the economic and financial sector surveyed by the Bank of Mexico cut the country's growth expectation for 2014 to a current estimate of 3.01 percent from 3.09 percent in March, according to the institute.

In the first two months of 2014, the Mexican economy grew 1.35 percent, the lowest rate of growth over the last five years for a similar period, the institute said. That compares with 1.66 percent over the same period a year ago.

Unemployment rate in Mexico posted at 5.2 percent during the first three months of the year, indicating that 2.5 million Mexicans on productive age and capacity are jobless, up from 4.81 percent at the data point in January.

Still, the inflation outlook is more optimistic, according to the same experts consulted by the Bank of Mexico. Analysts are confident that inflation should trend lower for the rest of the year. That indicator is currently around 3.85 from 4.09 percent in January.

Robert Shiller, Nobel laureate in economics, places much of the blame for Mexico’s current economic problems on tax reform passed last year by the Mexican Congress. Shiller gave the keynote address at the 24th Convention of Insurers Mexico on Wednesday.

Restrictions in the new tax law which stipulates limits on tax deductions, has discouraged the purchase of certain services such as insurance which has added to the slowdown in growth, Shiller said.

Individuals have an annual limit of US$7,000 in deductions, which means the government of Mexico is limiting the purchase of risk products rather than promoting them, said Shiller.

Confirmation of the downturn in the Mexican economy by the National Institute of Statistics and Geography, has added to the generally gloomy outlook from organizations such as the Organization for Economic Cooperation and Development and the World Bank.

Güncelleme Tarihi: 09 Mayıs 2014, 11:10