The Mexican economy contracted in February
The INEGI`s Global Indicator of Economic Activity in Mexico (IGAE, for its acronyms in Spanish), recorded its second consecutive month of contraction regarding the Mexican economy this year, setting at -1.6% annual (-0.2% monthly) during February. Figures suggest that the economy is very weak, even prior to COVID-19`s impact on the country. 7 out of the last 8 months show an annual contraction. On a monthly basis, the largest fall was recorded in primary activities (-5.75), while secondary activities contracted (-0.6%) and tertiary activities remained stagnant (0.1%). At an annual rate, the economy as a whole contracted, with activity in the primary sector falling (-) 8.3% with respect to February 2019, the secondary sector (-) 3.5%, and the tertiary (-) 0.2%. According to leading indicators, contractions in March will be deeper in the industry (secondary activities) as well as in services (tertiary activities), and given the fact that social distancing measures were not implemented decisively until the end of March, contractions could be deeper in April and May.
EU delays details concerning the economic package to mitigate COVID-19
The 27 leaders of the European Union member countries met yesterday to continue discussing the package to confront the virus`s economic consequences in the region. A 540 billion euro package was approved, which will provide support to workers, businesses and countries in the region – it`s expected to carry out on June 1st of this year. This is an agreement that resolves immediate problems, but discussions to define long term measures have been delayed, especially those regarding debt issuance to face COVID-19`s challenges. Northern European countries, especially Germany and Holland, oppose funding southern countries; something similar to the failure to respond to the sovereign debt crisis in 2010, which resulted in the Union`s fragmentation. Meanwhile, in Germany, the Economic Research Institute, Munich (Ifo) assured any recovery from the recession will very likely not be immediate (it will not take a “V” form), and only a very optimistic scenario considers the start of a recovery to take place halfway through the year. Lastly, in the UK, Boris Johnson`s government sticks rigidly to the negotiation calendar regarding a commercial agreement with the EU to finalize the departure from the European block. The British government has reiterated that it will not extend negotiations, even in spite of the virus`s setbacks. This suggests that if there is no agreement reached in principle in July, the UK could start preparations to definitively exit the European Union without a commercial agreement in December.