The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) and the financial institution Citibanamex have both downgraded their forecasts for the Mexican economy this year as the coronavirus pandemic worsens.

ECLAC executive secretary Alicia Bárcena said on Tuesday that the commission is predicting that GDP will shrink by 6.5% in Mexico this year. The commission forecast on April 3 that the contraction would be between 3.8% and 6%.

ECLAC is predicting that the coronavirus pandemic will cause GDP across Latin America and the Caribbean to fall by 5.3%, which would be the biggest recession the region has ever suffered.

In 1914, the first year of World War I, GDP declined by 4.9% while in 1930, the first full year of the Great Depression, the region’s economy contracted by 5%.

“A sharp increase in unemployment is forecast, with negative effects on poverty and inequality,” Bárcena said.

ECLAC said in a press release that Mexico will suffer the impact of a deceleration in the United States’ economy in 2020 and be hit by the decline in oil prices.

Meanwhile, Citibanamax is now predicting that the Mexican economy will shrink by 9% this year. Its previous forecast was a 5.1% contraction.

The bank said that without fiscal support from the government, the economy could contract by as much as 10.5% as a result of the coronavirus pandemic and the measures put in place to limit the spread of the disease. However, Citibanamex predicted that the severity of the recession will force the government to change its attitude on the provision of fiscal support.

President López Obrador said earlier this month that his administration wouldn’t cut taxes for large companies or increase public debt to support the economy amid the coronavirus crisis.

In addition to its bleak growth outlook, Citibanamex estimated that exports will decline 18% this year, personal consumption will fall 11.5% and investment will drop 19.7%.

It also predicted that the economic contraction will push down inflation to a year-end rate of 3% from 3.4% at the end of 2019.

Source: El Financiero (sp)