Mexico’s economy to plummet 10.5% over global COVID-19 effects, warns IMF

The International Monetary Fund is forecasting a nearly double-digit recession for Latin America and the Caribbean in 2020 – a contraction of 9.4% – as the region is dragged down by its two largest economies, Mexico and Brazil , which continue to suffer from the coronavirus.

The updated outlook for the region, released Wednesday, is down sharply from the 5.2% recession forecast in April, which already would have been the worst performance since at least 1980 , the first year in the IMF’s World Economic Outlook database .

The multilateral lending agency said in its report that in Latin America , “most countries are still struggling to contain infections.”

As of June 23 , Mexico registered 191, 410 confirmed COVID-19 cases , and 23,377 deaths .

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The new forecast includes a 10.5% dive for Mexico , which has lost about a million jobs during the pandemic.

The correction represents a higher dive than that of Latin America as a group, with -9.4%, and the global economy with -4.9%, according to the new World Economic Outlook .

The IMF's forecast for Mexico is the most drastic one among multilateral organizations. The World Bank forecast a 7.50% contraction for Mexico’s GDP this year.

The country’s industrial activity plunged nearly 30% in April compared to a year earlier amid its lockdown.

Prodded by the United States, Mexico reopened its automotive, mining, and construction industries starting in June , but plans for a broader restart of the economy have been delayed due to the continued high rates of new COVID-19 cases.

The Organization for Economic Cooperation and Development (OCDE) expects an 8.60% dive in case of a resurgence of the virus, while the Economic Commission for Latin America and the Caribbean (ECLAC) forecasts a 6.50% recession.

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The document called “A Crisis Like No Other, An Uncertain Recovery” warns that regarding the revision of the progress on the reduction of world poverty, per capita income could be negative due to the impact of COVID-19.

The latter will be most likely for developing economies where all the progress on fighting marginalization will be at risk.

The IMF mentioned all countries, even those who have apparently overcome the peak of infections, must guarantee the health sector has the necessary resources.

Meanwhile, the international community must strengthen its support for national initiatives so that countries with limited capacities have the opportunity to have access to the vaccines that could be produced.

The IMF predicts a 9.1% plunge for Brazil , which is Latin America’s biggest economy and most populous nation. That would be the deepest single-year tumble since at least 1901 when national accounts data from the government’s economics institute begin. Brazil contracted 2% in 1918, the year of the Spanish flu pandemic, according to the institute.

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Brazilian President Jair Bolsonaro

has argued that hardship inflicted by shutting down economic activity would ultimately be worse than that caused by the virus, even as the nation’s death toll rose to the second-highest in the world . Mayors and governors responsible for when and how to restart their economies mostly ignored Bolsonaro’s desire for a swift reopening. Following extended restrictions, cities and states have begun gradually resuming activity.

In late April, Economy Minister Paulo Guedes was still projecting a V-shaped recovery and said Brazil was “going to surprise the world.”

Brazil’s central bank

said in the minutes to its most recent monetary policy meeting, released Tuesday, that data indicate economic activity reached its low point in April. Industrial production that month fell 18.8% from the prior month, including an 80% decline in output of durable goods, according to data published on June 3. From January to April, Brazil’s economy shed 763,000 formal jobs , a report by the federal government said May 27.

Economists surveyed by Brazil’s central bank currently forecast a 6.5% contraction this year.

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