Growth is the only evidence of life.”
John Henry Newman, presbítero anglicano.
According to the most recent estimates regarding economic growth in the last quarter of 2021, an economic contraction is expected for that period which, added to the contraction that occurred in the third quarter of the year, would lead to the growth expectation of close to 6% initially had, is far from being fulfilled. According to the most punctual forecasts, growth in 2021 would be around 5 percent.
Consequently, as a result of the slowdown trend of the last two quarters of 2021, to which are added effects associated with the contraction of world economic activity at the beginning of the year, due to the new outbreaks of the Omicron variant -among other phenomena – The growth expectation for Mexico in 2022 would be, in the best of cases, around 2 percent. This level is far from the 4.1% growth forecast by the Ministry of Finance and which is the basis for calculating public income derived from economic activity, such as tax revenues.
Recalling the exercise that I have presented on other occasions, updating it with these recent estimates, if the 2018 GDP in Mexico were equal to 100 and we considered the falls of 0.17% in 2019, 8.31% in 2020 and the estimated growth for 2021 and 2022 of 5 and 2% respectively; we would have that, at the end of this year (in four years), the Mexican economy will be 2% below the level it had at the end of 2018.
For practically the previous three decades, including the period linked to the global financial crisis of 2008, the Mexican economy had faced what was called secular stagnation; This vision is based on the premise that, after sharp economic contractions, the private sector by itself is unable to return to growth dynamics, which makes public policy essential as a complementary recovery mechanism.
The reality is that in Mexico, first as a result of unclear public policies, high levels of corruption and a notorious and very serious institutional weakness, reflected particularly in a weak rule of law (to which factors such as insecurity are added), prevented that the country grow at the theoretical level that its internal and environmental economic conditions should allow.
Today, that mediocre average growth of 2% that we had for decades seems like a distant dream. The fact that in four years (obviously the product of a global economic contraction related to the pandemic, but accentuated by issues of internal economic policy and negative perception towards our country), the average growth rate is negative, represents one of the greatest setbacks in recent economic history of our country.
Too often, economic growth is criticized as a measure of human and social prosperity. Evidently, there are plenty of examples that economies with rapid economic growth were not capable of generating equitable conditions that would allow that growth to be reflected in all layers of the population. But what there is no evidence of is that there is a possibility of ending inequality in conditions of economic decline or stagnation.
Mexico is at a crossroads to make public and private institutional decisions that simultaneously favor distributive policies that combat deep (and uneconomic) inequity, but fundamentally based on sustained and lasting economic growth; at the height of the potential of the Mexican economy and the surrounding factors, which make it one of the potentially most favored economies among all emerging economies.
The author is a political scientist, marketer, specialist in behavioral economics and professor at the Faculty of Economics at UNAM. CEO of Fibra Educa and President of the Council for the Promotion of Educational Savings of Mexicana de Becas.
Follow him on Twitter @martinezsolares
CEO of Fibra Educa and President of the Council for the Promotion of Educational Savings
The author is a political scientist, marketer, financier, specialist in behavioral economics and professor at the Faculty of Economics at UNAM. CEO of Fibra Educa and President of the Council for the Promotion of Educational Savings.
Follow him on Twitter: @martinezsolares