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Mexico - July 2020

Economic effects of the pandemic will undermine investment

The International Monetary Fund (IMF) on 24 June updated its economic forecasts for 2020, arguing that the coronavirus (Covid-19) pandemic is having a much greater impact globally. As a result, economic recessions worldwide will be much more severe, and recovery will be more gradual than initially thought. Crucially, the IMF points out that while every region will face a recession this year, there will be significant differences across individual countries. In Latin America, the picture looks much worse, as its economic output could shrink by 9.4%, with Mexico facing an even larger contraction of 10.5% of GDP (larger than the IMF’s April projection of a 6.6% fall in GDP). This estimate is gloomier than those of the World Bank (7.5%), the Organisation of Economic Cooperation and Development (8.6%), and the United Nation Economic Commission for Latin America and the Caribbean (6.5%). This means that Mexico is likely to experience its worst recession since the 1932 Great Depression. Moreover, the IMF said that recovery will largely depend on stimulus support, which has been extremely limited in Mexico.

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