Mexico | The economic aftermath of Hurricane Otis

Summary

Facing one of the most devastating natural phenomena in the last decade, to estimate the economic aftermath requires two elements: 1) to understand the economic outlook in Guerrero state prior to Otis landfall; and 2) rely on empirical evidence of hurricanes in Mexico to estimate the economic impact.

Key points

• Key points:
• Guerrero's Gross Domestic Product (GDP) accounted for 1.3% of National GDP in 2021 (most recent official data), with a growth rate of 4% y/y compared to 2020, but still 5.1% below its pre-pandemic levels.
• Although the state’s GDP experienced a positive trend recently, the hurricane will put a dent in the state’s GDP growth slowing industries driving the state's economy
• Focusing on tourism, Guerrero accounts for 2.1% of tourism in Mexico; receiving 9.52 million tourists in 2022 with a hotel occupancy rate of 47.4% according to figures from the Ministry of Tourism.
• BBVA Research estimates a contraction in the quarterly variation of Guerrero’s ITAEE of -11.71% in 4Q23 with effects lasting until the end of 2024.
• Based on the pre-Otis base scenario, the estimated Guerrero ‘s GDP y/y% growth in 2023 falls from 2.1% to 1.1% ( -1.1 points) and from 1.2% to 0.4% (-0.8 points) in 2024.

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