The Economic Outlook for the World and Mexico
COVID hit very hard the global economy. At the end of 2020, we saw that only Asian countries have been able to contain the economic impact of the pandemic. Last October, the International Monetary Fund published its World Economic Outlook, the third edition of the year, with forecasts for the economy and for economic growth for 2020 and 2021.
International Perspectives: Negative Growth
Advanced Economies
The news is very negative, we have an economic decrease in advanced economies such as the US, the Eurozone, and Japan of -4.3%, -8.3%, -5.3%, respectively.
Latin America
The forecast for Latin America is obviously quite bad, more so because Mexico and the Latin American nations are still in the second wave. This implies that there will be no economic opening at least during the first half of 2021. Therefore, the outlook for Latin American economies looks quite complicated.
Susana Muñoz
DBM Contributor
Ms. Muñoz has more than 15 years of experience in opening businesses, trade, and investment promotion, product development, and economic and market research in Mexico and China.
Asian Economies: The Exception
On the other hand, emerging Asian economies, in this case, China, Taiwan, and Vietnam are the only economies in the world where economic growth is expected in 2020. Asian countries have managed to control the level of contagion, open their economies gradually or temporarily, but they have already announced several rounds of economic rescue packages. As a result, Asia is the best region in fighting this crisis and, thus, it is moving the world economy.
COVID Relief Measures in Asia
Among the various measures of the Asian countries, we have various employment subsidies, waivers of taxes and social security payments, electricity, water, sewage, as well as subsidies to the tourism, aviation and retail sectors. Incentives for exports have also been announced, economic support for unemployment, these measures in some way allow them to keep the economy afloat and control unemployment and, therefore, will allow them a better recovery in 2021, when We hope that the pandemic can now be controlled, through vaccines or when the second wave of COVID ends.
International Trade Policy Trends in Asia
Another relevant aspect is that, despite the pandemic, Asia has been able to maintain its economic agenda during this year and continues to bet on greater economic integration, unlike the United States, Latin America, and the European Union that are regions with very different economic and commercial agendas.
Asia is betting on integration even with China, we saw it recently with the announcement of the signing of the RCEP, this mega free trade agreement. For instance, Japan, a party to CPTPP, also signed RCEP and is also negotiating a free trade agreement with Korea and China. The US-China trade war has affected Japan’s interests because it has many important investments in China, limiting its exports to the US.
The US is likely to continue with its trade agenda. This is pushing manufacturing companies that are located in China to relocate to Vietnam or other Southeast Asian countries. Vietnam launched a new free trade agreement with the European Union and with the UK. Cambodia has also just announced its free trade agreement with China, in addition to the free trade agreement that they already have in the ASEAN framework.
Tourism, Electronic Commerce, and Technology
Also, the travel bubbles that Asia is implementing are allowing to reactivate the tourism sector, and particularly business travel.
Governments and the private sector are promoting cooperative activities in technology and industrialization. Along these lines, the digital economy has been the great winner of the pandemic, promoting Fintech, online services, and logistics. As a result, the digital economy is placing products and services for the Asian market.
Impact on the Mexican Economy 2021
Definitely, the pandemic has stopped many investment plans that were in our country. Some Mexican policymakers have thought that foreign investment would pour down into Mexico with the entry into force of the United States, Mexico, Canada Agreement (USMCA) and the fact that the trade war has not stopped.
Unfortunately, this is not the case since Mexico and the world are in the midst of the pandemic. Furthermore, Mexico no longer has “branches” abroad that could help to promote the country as an investment destination. In addition, there are very few possibilities to travel and much fewer possibilities to interact and promote our country at least not until the second half of 2021.
Mexico has many competitive advantages. However, we still have to make a huge effort of economic promotion that allows us to explain to foreign investors what are the advantages of investing.