Mexico’s Record Activity Plunge Signals Sluggish Recovery

(Bloomberg) -- Mexico’s economic activity plunged by a record in May, continuing a free-fall caused by a coronavirus outbreak that’s wreaking havoc on output.

Activity, as measured by a proxy known as IGAE, dropped 22.7% compared to a year ago, the national statistics agency reported on its website on Friday. That’s more than the median forecast for a 20.3% contraction in a Bloomberg survey. The monthly reading fell 2.6% from April, also worse than economists’ estimates.

Latin America’s second-largest economy is expected to shrink 9.6% this year, the most since 1932, according to analysts. Their estimates have grown bleaker in the past weeks as virus cases break daily records and limit reopening in parts of the country, such as Mexico City.

“The recovery will be sluggish due to the government’s reluctance to implement proper fiscal support, and tough external conditions,” Andres Abadia, an economist with Pantheon Macroeconomics, wrote in a research note. “The bad news is that leading indicators and sectoral data suggest that the economy will struggle over the next three-to-six months.”

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Finance Minister Arturo Herrera said earlier this month that it will take longer than anticipated for economies to bounce back. The international consensus for a two or three-month lockdown followed by a recovery is no longer realistic, he said during a virtual meeting of G-20 finance ministers.

“The recovery horizon will be longer, as long as a vaccine or an effective treatment isn’t available,” he said.

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