The Department of Finance and Public Credit (SHCP) is confident that the economy can grow this year by about 6.5 percent, as first-quarter GDP revised upwards, while the vaccination plan is progressing and has an increasing impact. In reopening sectors, branch agent Gabriel Yorio is reassured.
In an interview with El Financiero, the official noted that the Treasury had revised its growth forecast for 2021 to 6.5 percent from the 5.3 percent projected in April, in fact, he said that the new “bottom line” for new growth for this year is 6 percent, which is positive. To return the economy to its pre-pandemic level.
“It is very difficult to assume that the sectors that grew in the first quarter will not grow anymore; with vaccination and the reopening of the economy, what we will see in practice is that these sectors will grow more and that those lagging sectors will catch up, and this is what makes us feel confident in actually progressing by 6.5 in percent,” he said.
Asked whether the forecast of 6.5 percent was optimistic given that the vaccination plan indicated that 30.4 million doses of the 80 million doses were expected to be in place by the end of May, Yorio declined to be optimistic in the estimate, for On the contrary , consider it realistic and there are economic components to it.
“We have a minimum of 6 per cent at the moment, which is why 6.5 is not very optimistic, it is actually quite realistic, because if what happened in the first quarter remains the same and lagging sectors like services and accommodation and transportation will recover at the pre-pandemic level, And that growth account will give us 6 percent,” he said.
With regard to job recovery, it was estimated that formal employment registered in the Medical Services Management System could restore its pre-epidemic level by the end of the year, while the recovery in the informal sector may take longer.
“Vaccination is what will allow the restoration of jobs, which is why we say that vaccination is the economic policy that will allow the use of factors of production and this means working capital and labor; we will likely see pre-pandemic levels of formal employment at the end of the year,” he predicted.
They can delay the rate hike
Asked if it was time for the Bank of Mexico to resume the upward trend in the interest rate, Yorio replied that although it would be a decision of the board of directors, the effects of inflation at this time are temporary and thus presented. Monetary policy will not necessarily be effective.
He said the concern about the central bank’s actions in relation to raising the interest rate is that this decision is not about a lasting effect of inflation, which could have consequences such as increasing the cost of financing for the whole economy. And its effect on recovery.
He suggested, “It seems that the peak of inflation was in April, so I think the council might hold a few more meetings to monitor the behavior and decide on the rate.”
What takes them away from sleep
In the morning, Yorio acknowledged during an Organization for Economic Co-operation and Development (OECD) event that three concerns are “sleeping” Mexico’s fiscal officials: recovery in employment, widening social gaps, and interest rates rising more quickly than expected.
“In the short term, jobs recover, especially as these social gaps continue to widen, and eventually interest rates start to rise a little faster than we expected,” the official said of the main concerns, regardless of the vaccination issue. It is a priority at the regional level.
During a session on how to boost the recovery in Latin America, he explained that in the recovery process in Mexico, there is concern about the monetary policy of the United States.
“An anticipation of inflationary pressures in the US may push some banks in the region to adjust their monetary policy earlier than they should, and this will eventually have an impact on the economy,” he said.
With information from Leticia Hernandez.