Download MEXICO 2010-2012. MACROECONOMIC FORECAST

Eduardo Loria
Graduate Studies Division – School of Economics (UNAM)
http://www.eduardoloria.name, [email protected]
MEXICO 2010-2012.
MACROECONOMIC FORECAST
Eduardo Loría1
August 6, 2010
PRESENTATION
The following country report presents: a) the main and most recent features of the
Mexican economy, and b) an annual and quarterly forecasting for 2010.3-2012.4.
The tumultuous world scenario and the Presidential and Congress elections in Mexico
in 2012, restrain a further outlook.
1.
GENERAL FRAMEWORK
1.1
Recent events
In spite of the adverse news regarding the financial (fiscal) problems and poor economic
performance of the United States (US) during de 2Q, the Mexican economy has had an
outstanding recovery during H1, because of the strong industrial exports and a sharp
improvement in the agricultural sector.
The industrial performance had a lot to do with the recovery of the US’s industrial
activity.
We cannot yet conclude if the real estate and construction sector as well as the labor
markets will recover soon in both countries, since they are so closely linked.
The 2009 world wide crisis let us see the important economic dependence to the
American Economy, notwithstanding the economic (trade and investment)
diversification of recent years.
1
Coordinator of the Center of Modeling and Economic Forecasting. School of Economics, UNAM.
[email protected], www.eduardoloria.name
I thank the technical assistance of Jorge Ramirez, Adriana Diaz, Catalina Libreros, Daniela Tirado,
Emmanuel Salas, Juan Marquez and Leonardo Lopez. The contents not necessarily represent the
institution’s point of view. Total or partial reproduction is allowed only if it is quoted.
1
Eduardo Loria
Graduate Studies Division – School of Economics (UNAM)
http://www.eduardoloria.name, [email protected]
Foreign Direct Investment in Mexico by Country of Origin
Mexican Exports to US and EU
Uncertainty and nervousness in the markets (commodities, currencies and stocks) and
the ongoing speculative practices are the sign of the times. Despite the blur and uneven
recovery of developed economies, capital flows and currencies continue stumbling.
A number of analysts have been warning about the increasing odds of a double dip
recession, and a fiscal crisis world wide. Needless to say, the lack of cash, the credit
crunch, the financial insolvency and the bankruptcy of companies and individuals will
persist despite the financial rescue and the continuance of economic stimulus in many
countries -both fiscal and monetary.
If that is the case, it is plausible to consider a strong contagion to the Mexican economy.
As an example, let’s recall the severe contractive effects on output, trade, remittances
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Eduardo Loria
Graduate Studies Division – School of Economics (UNAM)
http://www.eduardoloria.name, [email protected]
and foreign and domestic investment coming from the international shocks that affected
Mexico last year. In the next pictures we compare those effects in the two previous
Mexican crises.
Effects of the External Shocks on the Mexican Economy
in Two Crises
The total macroeconomic cost in 2009 was near 30 times higher compared to what
happened in 1995 in terms of GDP.
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Eduardo Loria
Graduate Studies Division – School of Economics (UNAM)
http://www.eduardoloria.name, [email protected]
Total Costs of External Shocks (% GDP)
5
4.5
4
3.5
% GDP
3
2.5
2
1.5
1
0.5
0
1994-1995
2008-2009
1.2 Structural changes.
Despite these outstanding negative effects on the external sector, it is worth noting that
neither output nor unemployment weres affected, as it used to happen in the past.
MEXICO: Economic Growth and Unemployment
10
8
6
6.2
6.8
5.5
4
2
0
-2
-4
-3.5
-6
-8
1980
-6.2
1985
1990
-6.5
1995
GDP
2000
2005
U
4
Eduardo Loria
Graduate Studies Division – School of Economics (UNAM)
http://www.eduardoloria.name, [email protected]
If we consider the previous crises in terms of the elasticity of employment to GDP, we
have the lowest rate ever in 2009:
GDP, UNEMPLOYMENT AND ELASTICITIES
GDP*
U*
εUY
1983
-3.49
61.90
-17.76
1995
-6.22
68.24
-10.97
2009
-6.54
37.81
-5.78
* Annual Growth But it should be stressed that these features have happened in the presence of an
impressive raise in the female participation rate.
FEMALE/MALE PARTICIPATION RATE
.64
.62
.60
.58
.56
.54
.52
00
01
02
03
04
05
06
07
08
09
Taken into account that unemployment did not grow as it used to be, some facts seem to
be highly explicative. On the one hand, it has been an impressive increase in the
informality, mainly in women, and underemployment in the case of men.
5
Eduardo Loria
Graduate Studies Division – School of Economics (UNAM)
http://www.eduardoloria.name, [email protected]
FEMALE/MALE RATIO
68
64
60
56
52
48
44
40
36
32
00
01
02
03
04
informality
05
06
07
08
09
underemployment
Therefore, this kind of rapid labor market precariousness should be considered as the
main cause of the very low rate of unemployment. The traditional valve of escape –
namely emigration to the USA– is not longer working.
2. Economic Forecasting
The Center of Modeling and Economic Forecasting of the School of Economics of
UNAM (http://www.economia.unam.mx/cempe/), in order to set expectations of the
economic agents, provide the most conservative outlook that must be considered as a
base line scenario according to the information we have already presented.
This forecasting exercise contemplates the following crucial factors:
•
A slowdown pace of economic growth in the US.
•
The stagnation of remittances coming from the US.
•
The severe effects of rampant crime on macroeconomic variables such as
tourism and investment (domestic and foreign).
•
The lack of Labor and Fiscal reforms and their effects on public and private
investment.
•
The uncertain evolution of the oil prices and the secular reduction trend of
exports.
6
Eduardo Loria
Graduate Studies Division – School of Economics (UNAM)
http://www.eduardoloria.name, [email protected]
•
The evolution of presidential campaigns (to start in 6 more months) and the final
outcome of elections in July 2012.
Our forecast points out lower growth rates of GDP and employment in the quarters and
years to come.
To sum up, we depict a conservative Mexican macroeconomic scenario for 2010.3-2012.4
which will depend mainly on what will happen in Mexico and in the United States.
Unfortunately, several external shocks shall continue; in our country, the lack of safety
of people and investors has intensified. Rampant crime will affect economic activity
probably more than financial turmoil.
Likewise, the advances of the structural reforms, particularly labor, fiscal, educative and
energetic have stopped and they are damaging basic aspects of the long run growth.
This makes clear that institutional aspects are deteriorating and affecting the economic
variables.
Finally, it is plausible to consider world inflationary pressures due to climate change that
seriously affected the prices of commodities. This is also an adverse fact for the finances of
the Mexican government, as well as the reduction of the oil exports. These factors put a lot
of pressure on next years’ budget.
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Eduardo Loria
Graduate Studies Division – School of Economics (UNAM)
http://www.eduardoloria.name, [email protected]
Forecasting Assumptions, 2010 – 2012
(Growth Rates)
Variable
2010
2011
2012
12.9
13.2
13.5
1.1
1.1
1.2
1.5
2.3
3.0
1.9
2.0
2.5
4.4
4.4
4.4
Exchange Rate
Nominal1
2
Real
3
US GDP
3
US CPI
Interest Rate (Cetes, 28 days)
1
Pesos per US Dollar, annual average;
Unit; 4 % points, annual average.
2
4
Index, 1993 = 1.0;
3
The Economist Intelligence
Annual Forecasting: 2010-2012
Variable
2010
2011
2012
4.8-5.1
2.9-3.4
3.0-4.3
2.5
1.0
1.5
Employment ( Change)2
869.0
368.0
544.0
Unemployment rate
5.4-5.6
5.6-6.4
4.6-5.1
Average Real Wages1
0.4
1.1
2.5
Inflation (CPI)3
4.7
3.7
3.8
Trade Balance4
-10.3
-9.6
-10.2
As % of GDP
-1.06
-0.95
-0.98
Current Account4
-11.0
-6.6
-10.3
-0.65
-0.98
GDP1
Employment1
As % of GDP
1
2
-1.13
3
4
Percentage Change; Thousands of people; December – December; Billions of
USD; Recent Estimates: September 28, 2010. Source: Own calculations, based on
Eudoxio: Macroeconometric Model of the Mexican Economy.
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Eduardo Loria
Graduate Studies Division – School of Economics (UNAM)
http://www.eduardoloria.name, [email protected]
Quarterly Forecasting: 2010.3-2012.4
Variable
2010
2011
2012
GDP
4.8-5.1
2.9-3.4
3.0-4.3
I
4.3
2.7-2.9
2.7-4.3
II
7.6
1.4-2.2
3.3-4.0
III
3.7-4.4
2.9-3.5
1.7-3.1
IV
2.2-2.3
4.4-4.8
4.3-5.7
Unemployment
5.4-5.6
5.6-6.4
4.6-5.1
I
5.4
6.1-6.7
5.0-5.5
II
5.2
5.7-6.6
4.7-5.3
III
5.6-5.8
5.8-6.6
3.9-4.7
IV
5.4-6.0
4.9-5.6
4.1-5.4
Own calculations, based on Eudoxio: Macroeconometric Model of the Mexican Economy.
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