Making forecasts is difficult, especially when it comes to the future, said the great Yogi Berra, whom some remember as a baseball player. At the end of 2019, no one anticipated the pandemic and projections about how we would fare in 2020 were cautiously optimistic. The Mexican economy was going to grow 2%, according to the Treasury. Independent analyzes put GDP in a range of 1 to 2 percent. It ended up falling 8.5 percent.
At the end of 2021, very few saw Russia’s invasion of Ukraine coming. For 2022, the Treasury projected a growth of 3.4%, well above the consensus of the experts where the numbers around 2.5 percent predominated. The bottom line will most likely be about half of that, 1.7 percent.
What will 2023 be like? From now on, we had better contemplate the possibility of an extraordinary event occurring. Of those that move the board and collapse the forecasts. It may be that a black swan, a green swan, a gray rhinoceros visits us… it may also be that nothing happens outside the box. In any case, we need to know what the augurs say. For many it is preferable to have a bad prognosis at hand than to have none at all, Nassim Taleb reminds us: that kind of emptiness is almost unbearable in today’s world.
For 2023, the Treasury repeats as the author of the most optimistic forecasts. It estimates a growth of 4% for the Mexican economy. To substantiate optimism, tax officials are betting that nearshoring will make a difference. Will be? It is not crazy to put the chips and light the candles to this variable: global production is being reorganized, as a consequence of the tension between the United States and China and the decomposition of the European scenario after Russia’s invasion of Ukraine. It is normal for Mexico to appear as an interesting option to attract part of those investments that are now in China or Central Europe. The owners of industrial parks attest that this appetite to come to Mexico exists. There is a lot of interest in locating on the northern border, in the Bajío, in the West.
Treasury does not have a monopoly on predictions; he doesn’t even have a record of making accurate estimates. In the last two decades, their GDP numbers have failed 17 or 18 out of 20 times. Based on this, the official forecast has at most a 15% chance of being right this time. Where to look? The vast majority of experts agree that the Mexican economy will not grow as much as government officials project. At the moment, those who calculate a GDP close to 1.5 percent predominate. The least optimistic of all institutional forecasts is that of the International Monetary Fund. He places his GDP estimate for 2023 at 1.2%.
What do you mean for now? The projections are most likely to move lower. The impact of the rise in interest rates will weigh more and more. They will be above 10% and will inhibit investment and consumption. Furthermore, the US economy will almost certainly slip into recession at some point in 2023. If that happens, the Mexican economy will struggle to grow. It is logical: 40% of the Mexican GDP has to do with trade with our neighbor to the North; 4% of this GDP is related to remittances.
Could nearshoring make a big difference? Mexico has many things in its favour. Beyond the international circumstances, there is the growing integration of the economies of the North American region. An industrial fabric has been installed in Mexican territory that has found logistical advantages of proximity to the United States, as well as highly qualified human capital at a lower cost than in the United States or Canada. Not everything is in favor. On the other side of the scale are physical insecurity and legal insecurity; the difficulties in obtaining electricity supply in the conditions required by global factories and, above all, the uncertainty about the outcome of the controversies within the T-MEC. To peek into 2023, do you prefer optimism or realism?
