Tuesday, June 2, 2009

Mexican Economy Slips. Remittances are Down

Although there is agreement among economists that the Mexican economy will shrink this year, there is disagreement about how much. Goldman Sachs Group Inc. has recently indicated it expects Mexico’s economy to shrink 8.5 percent this year. This would make it the biggest economic decline since 1932. This figure is higher than the projections of the Mexican central bank (Banco de Mexico), which has recently raised their forecast from a 4% decline to a 5.8% decline. In January it projected a decline of only 0.8% to 1.8%.

The Banco de Mexico surveys economists every month for projections about the future of the Mexican economy. Every single month for the past 17 months, the forecast for gdp in 2009 has been progressively lower.

New data has come in on remittances to Mexico from Mexicans living abroad, mainly from the U.S. There are an estimated 12 million Mexicans residing in the U.S. Each month they send dollars back home, usually to family members. The value of these dollars is higher than the dollar volume generated by tourism, and contributes significantly to the Mexican economy. Only sales of oil bring in more foreign exchange. The value of these dollars declined nearly 19% in April, from $2.19 billion in April 2008 to $1.78 billion in April 2009. During the first four months of 2009 remittances were $7.26 billion, a drop of 8.7% compared to the first four months of the previous year.

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