Mexico expects a growth of 5.3% of GDP in 2021 due to the boost of vaccination

A woman receives the AstraZeneca vaccine at the Olympic Stadium in Mexico City.CLAUDIO CRUZ / AFP

Vaccination against covid 19 will have a significant impact on the economic growth of Mexico.

The Ministry of Finance forecasts that the country's gross domestic product (GDP) will reach 5.3% during 2021, according to the general economic policy criteria that it delivered to Congress on Wednesday.

The figure improves the outlook that had initially been an increase of 4.6% of GDP.

The Mexican Government indicates in the document that the recovery of various economic activities, which were affected during the pandemic, will be the ones that drive the indicators.

The forecast estimates that Mexico's growth will be between 4.3% and 6.3% at the end of the year.

So far, Mexico has applied some 7.4 million vaccines among its 127 million inhabitants.

The pillars to sustain this rise, says the Treasury, depend on the speed with which vaccines are applied among the population, the economic recovery of the United States - Mexico's main trading partner -, the rise in oil prices and stability of the country's financial system.

"The rapid development of various vaccines and the beginning of their application, added to the sustained efforts of governments and central banks of the world to mitigate the impacts of the pandemic, support the expectation of a reactivation in 2021 more accelerated than that foreseen in 2020" says the document.

Mexican GDP sank 8.5% during 2020 due to the pandemic.

The Mexican Treasury estimates that GDP will grow by 3.6% by 2022, because the economy "will fully recover its level prior to the pandemic."

The outlook shown by the Mexican government is also optimistic with inflation data: for 2021 it is located at 3.8% and for 2022, at 3.0%.

The latest data from the National Institute of Geography and Statistics (Inegi) indicates that the price indicator stands at 3.54%, the highest since 2017, mainly driven by the increase in energy prices.

The Treasury points out that these increases are "transitory."

• 1.5 million vaccines from the US arrive in Mexico, the largest batch against covid so far

Mexico's economic growth goes hand in hand with that of the United States.

The Mexican government estimates that the reactivation of various industries in that country, which benefit from the free trade agreement (T-MEC), will set its Mexican partners up and running.

In addition, the injection of resources by the US government ends up in the hands of Mexicans who send remittances to the country.

In 2020, the number of remittances reached 36,945 million dollars, according to data from the Bank of Mexico.

“The expected acceleration in the recovery of the United States, our main commercial partner, underpinned by its own vaccination process and by the fiscal stimulus package approved on March 10, for 1.9 trillion dollars will give an additional boost in Mexico to various sectors that have a close link with foreign trade ”, states the document sent to the Mexican Congress.

The Mexican Treasury also plans to propose a tax reform that could be discussed in Congress in the second half of the year, after the midterm elections, to increase public resources.

The Secretary of the Treasury, Arturo Herrera, has assured Congress that the measure seeks to modify the tax system, rather than raise new taxes.

The Mexican president, Andrés Manuel López Obrador, has assured in several interventions that during his six-year term there will be no tax increases.

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