Economics: Data heightens 2021 economic tasks
The economic news of the past month showed some signs of an easing of the recessionary panorama as the -3.3% yoy fall in industrial activity for November was one of the least pronounced negative results of 2020 thanks largely to gains in some components of the manufacturing sector. However, the domestic market remains very weak, with the tertiary sector contracting an annual 5.1% in 4Q20, according to preliminary data, and indicators of consumer spending and sentiment deeply depressed.
On a brighter note, there were new signs that the governing Morena party camp continues to back away from the proposal it rushed through the Senate in the waning hours of last year’s fall session to force Banco de México to acquire all dollar bills from financial intermediaries that cannot or do not wish to use financial correspondents to physically return such banknotes to the United States. Although the bill is set to be taken up by the Chamber of Deputies as soon as February, there are signs the central bank will be granted a reprieve, with the Ministry of Finance discussing alternative ideas for addressing the manner in which the market for dollars in cash form can be handled.
But Banxico’s international reserves remain a central issue this year as the central bank’s annual foreign exchange trading surplus (ROBM) is no longer likely to help plug the major budget holes left by the exceedingly optimistic revenue, deficit and public debt levels contemplated in the administration’s 2021 budget. The ROBM is likely to account only for between 30 and 50 billion pesos in 2021, a fraction of the 150-200 billion peso range analysts had been considering several months earlier. This poses new obstacles for generating a counter-cyclical policy for economic reactivation and leaves public finances more vulnerable to short-term developments and the heightened spending demands of a crucial election year.
Now read on...
Register to sample a report