After the lockdown: An industry check on Mexico’s economy
Since the beginning of this year, the coronavirus has been holding the world under its spell. The economic consequences of the pandemic have also hit Mexico, the second largest economy in Latin America.
Economic lockdown: most affected industries
As a result of the five-month lockdown, the Mexican automotive industry, in particular, has suffered severe losses. From April to June, production partly shrank nearly 64%. Car manufacturers based in Mexico, including Audi, Volkswagen, and BMW, had to temporarily stop production as a result of the drastic decline.
The electrical and chemical industries are also among the most economically affected sectors. Due to lockdown, production fell around 22% and 10% accordingly.
In addition, the wholesale and retail trade sectors have also suffered from the general consumption decline during the lockdown. Here, the only exception is the food sector, which was spared major losses during the lockdown as the industry was not affected by closures.
As for the service sector is concerned, the lockdown had a particular negative impact in the tourism industry, which under normal circumstances accounts for 8.7 % of Mexico’s GDP. Following the lockdown, the number of foreign tourists dropped by 57.5% in the first six months of the year. Cultural and tourist sites are now being gradually reopened to visitors.
First signs of recovery
While the tourism sector is slowly regaining momentum, other industries are recovering much faster from the pandemic consequences. Last July, the heavily affected automotive industry, for example, showed a significant growth again and even exceeded production by 1% with regard to the same month of the previous year.
According to the German company Nettelhoff, based in Querétaro, the parts production industry has regained an immediate strong demand following the end of the lockdown. Due to the increase in demand, the company is currently able to utilize nearly 90% of its production capacities again.
As for the export sector, the automotive industry has caught up considerably after the end of the lockdown. Exports in July increased by 93% with regard to the same month of the previous year. This accounts for 33% increase compared to June.
Therefore, despite the overall negative scenario, there is still a glimmer of hope for Mexican Industries. This applies not only for the Automotive Industry which stands for Mexico’s most important export sector. The wholesale and retail trade sector seems to have overcome this collapse as well. Sales in the trade sector have shown significant improvement in June, while the retail trade recorded an increase of 7.8% compared to May. Even the wholesale trade achieved 11.1% growth in the same period.
Forecast and outlook
The steadiness of the Mexican economy full recovery from the lockdown consequences will crucially depend on the further course of the pandemic. In particular, the successful development of a vaccine against the virus could significantly boost the recovery process. In the absence of a further Corona widespread outbreak, the forecast for complete economic recovery is two years.
A decisive factor that will favor a rapid recovery process for the Mexican economy is the strong economic integration of Mexico with the USA and Canada. This will help Mexico to maintain a good economic position on the American continent even in times of crisis.
Do you have any questions about Mexico’s current economic development? Or are you already part of it and your company is directly affected by the consequences of the lockdown? We are on your side even in difficult times! With our comprehensive range of consulting services we find solutions for the individual needs of your company even in times of crisis. Here you can find an overview of our services.
