Forecasts for Economic Recovery This Year Mask Dire Statistics for January-March Quarter

SourceMex Economic News & Analysis on Mexico, May 8, 2002 | Go to article overview
Save to active project

Forecasts for Economic Recovery This Year Mask Dire Statistics for January-March Quarter


Private and government economists are beginning to project a recovery in the Mexican economy later this year, but the optimistic forecasts are masked by extremely dire statistics for the first quarter of this year.

Many of the optimistic forecasts are based on projections for a rebound in the US economy this year. The US experienced stronger-than-anticipated GDP growth of 5.8% in the first quarter of this year.

The US projections have led private and government economists to revise their forecasts for Mexican economic growth. Shortly after the release of the US first-quarter data, the Banco de Mexico (central bank) revised its projections to expect an annual GDP growth of 1.8% for Mexico, compared with its initial economic-growth forecast of 1.5%. The bank also released a separate survey of 30 private financial analysts in early to mid-April, which on average anticipated a GDP growth of about 1.63% this year.

Similarly, the private Centro de Investigacion y Docencia Economica (CIDE) modified its projections to anticipate GDP growth at 1.97%, compared with its previous estimate of 1.6%. US financial services company J.P. Morgan revised its forecast for Mexico's GDP growth to 1.8% from 1.4% previously.

"The fundamental factor in Mexico's recovery is inevitably the US economy," said Armando Baqueiro, the central bank's director of economic research. "If the US experiences robust growth, this will be reflected in Mexico's economy."

The rush to revise forecasts upward for the Mexican economy was also evident overseas. In its latest projections for Latin America, the European Commission (EC) raised its forecast for Mexican economic growth to 1.9% this year, compared with an earlier estimate of 1.3%.

But some economists say the Mexican government should adopt a more cautious stance because of recent projections that the US economy will not begin a solid recovery until the end of the second quarter of this year.

Roberto Galvan, director of Vanguardia Investment, said the first-quarter US GDP statistics were slightly misleading, since the US growth was fueled partly by increased defense spending and liquidation of inventories on the part of many US companies. US companies continued to experience weak sales and low profits during the first quarter of the year, which is not a sign of strength in the economy, said Galvan.

The Centro de Estudios Economicos del Sector Privado (CEESP) cautioned that any US recovery this year would be weak, compared with those of the 1990s, and would be followed by another economic retreat.

Beyond the impact of the US on the Mexican economy, the CEESP said growth would be limited by restrictions imposed by the Mexican Congress, such as a generally ineffective tax-reform bill approved at the beginning of this year and the decision to restrict investments in strategic areas of the economy like generation of electrical power.

Mexico's GDP contracts by 0.7% in first quarter

Economists also point out that the next three quarters will have to make up a lot of ground lost in the first quarter of the year, considered one of the worst in recent memory. The Banco de Mexico is scheduled to release its official data for the first quarter sometime in mid-May. But economists who responded to a survey conducted by the central bank anticipated, on average, a contraction of 0.7% in Mexico's GDP during the first quarter of the year relative to the last quarter of 2001.

When compared to the first quarter of last year, Mexico GDP probably contracted about 1.6%, said the central bank's Armando Baqueiro.

Some observers noted that domestic consumption remained fairly strong during the first quarter of the year despite the economic downturn. "Lower inflation and a decline in interest rates to historically low levels...have promoted consumer spending even though the economy is not growing," said the daily newspaper El Financiero.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Forecasts for Economic Recovery This Year Mask Dire Statistics for January-March Quarter
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?