Mexico. The Mexican economy continues to face one of the worst crises in its history, registering a marked fall in practically all of 2020. Uncertainty still persists about the longevity and depth of the structural and systemic impacts of the pandemic in the medium and long term.
However, macroeconomic indicators reveal an economic reactivation at the beginning of the second half of the year, both in Mexico and in the world, despite the continuity of the global health and economic crisis. According to timely figures from INEGI, Mexico's GDP rebounded during the third quarter of 2020 (Q3-2020), registering a smaller fall compared to the immediately previous quarter, with a contraction of -8.6%, 10.1 percentage points lower than that of Q2-2020 (-18.7%).
Despite this, annual GDP is expected to register a cumulative decrease of -9.3%, according to estimates by private sector specialists compiled by the Bank of Mexico, given the increase in the number of infections, the re-tightening of restrictions on mobility, and the consequent paralysis of production chains.
In Q3-2020, the countercyclical behavior of the telecommunications sector stands out, after a period of 'drag' of the macroeconomy, reaching a positive growth of 1.7%, far exceeding the fall of -10.7% in Q2-2020.
This ratifies the essentiality of telecommunications for individuals, households, government and companies by supporting social, educational, informative, cultural, romantic, entertainment and, of course, productive life during the current pandemic.
Telecommunications Dynamics in Q3-2020
In absolute numbers, revenue accounting amounted to $127,116 million pesos in Q3-2020, 1.7% more than in Q3-2019. In general terms, this rapid recovery is attributable to the reopening of businesses and companies, the partial economic reactivation, as well as the increase in social mobility.
The segment that continues its streak of positive and significant growth is that of Pay-TV and convergent services, registering an annual growth of 7.0% during the period, given the growing preference and demand for packaged services (internet, telephony, Pay TV and / or on-demand content platforms) provided by cable operators.
Meanwhile, mobile telecommunications rose in an extremely noticeable way, going from registering a fall of -18.2% during Q2-2020, to an annual growth of +2.4% in Q3-2020, as a result of the rebound in the consumption and contracting of these services.
The segment that during Q3-2020 continues to register a downward trajectory was that of fixed telecommunications. The significant reduction in the consumption of voice services, as well as the continued process of adjusting rates downwards, resulted in an annual fall of 6.0% in revenues from the provision of telephony and broadband internet for homes and businesses.
Sectoral Expectations for 2020
Despite the rebound observed during Q3-2020, the abrupt fall in revenues in Q2-2020 and the foreseeable relapse in economic activity during Q4-2020 will cause this sector, like many others in the Mexican economy, to register an aggregate contraction throughout 2020.
Timely estimates prepared by The Competitive Intelligence Unit (The CIU) place the reduction in revenues in the sector between -0.1% and -1.6% in annual terms, with an average scenario of fall of -1.1% in 2020. This is 8.2 percentage points higher than projected for the national productive apparatus.
However, it is still necessary to continue with the punctual monitoring of the balance of impacts detonated by the pandemic on this sector, since there is no precedent to anticipate the depth and longevity of its distortions in this and other industries that make up the national productive apparatus.
Again, this sector demonstrates its countercyclical behavior in recessionary periods, as well as its resilience by recovering in just one quarter from the impact of low economic activity and the strict confinement registered during Q2-2020.
The path of the telecommunications sector for 2021 remains uncertain, given the uncertainty about the evolution of the pandemic in the country. However, if the positive forecast in the growth of economic activity for next year persists, a significant significant rebound in the sector could be expected, which even exceeds the growth registered during 2019 (4.2%).
The main factor driving growth would be the revitaminization of economic activity and consequently, the greater purchasing power of Mexican users. Likewise, the acceleration in social digitalization generated by the pandemic crisis will detonate the consumption of connectivity services.
Text written by Ernesto Piedras of The Competitive Intelligence Unit.
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