Mexico is slowly rebounding from the initial shock of the coronavirus pandemic. The National Institute of Statistics and Geography reported that Mexico suffered the largest quarter-on-quarter GDP retraction in its history, falling 17.3 percent in the second quarter of 2020. Lifting lockdowns last summer increased economic activity, especially in the service sector.
According to Fitch Ratings, in the third quarter of 2020 the Mexican economy recovered some of its coronavirus-related losses by growing 6.5 percent compared to the previous quarter. However, the agency warned about a recovery slowdown heading toward the fourth quarter. More specifically, the industrial production, manufacturing and services sectors showed patterns of contraction in the latter months of the third quarter. The unemployment rate has consistently decreased, however; at least 1.8 million people who lost their jobs during the early months of the pandemic have not returned to the work force.
During the pandemic, President Andres Manuel López Obrador has been inflexible in steering away from his development plans, even in face of the domestic and external shocks arising from the emergency. The president’s personal brand is characterized by strong leadership and a tight grip over economic policy, based on the principles of public austerity, control of strategic resources and the strengthening of state-owned companies. Mexico’s government did not issue a fiscal stimulus package to the private sector. However the state provided a relatively small credit line to mitigate the impact on small businesses during the first months of the pandemic and lowered the interest rates from 6.7 to 4.5 percent in order to facilitate credit for small businesses.