Mexican economy reported stagnation in first quarter

29/04/2021

The restrictive measures to reduce COVID-19 contagions and an energy shortage in February will be reflected in zero growth for the Mexican economy in the first quarter of 2021, according to economic analysts. The National Institute of Statistics and Geography will publish next Friday the timely estimate of GDP during the first quarter, where economists expect a quarterly variation of between 0.0% and 0.1%, compared to the last quarter of 2020.

The economy of Mexico stagnated in the first quarter. Image: Pixabay
The economy of Mexico stagnated in the first quarter. Image: Pixabay

"We have adjusted our estimate of the preliminary GDP data (to be published this Friday) to a quarterly variation of 0.0%, which considers a partial rebound in the Global Indicator of Economic Activity (IGAE) for March, and would imply annual rates of -4.3% on the original series and -3.4% on the adjusted series," referred an analysis of Citibanamex.

Meanwhile, the median of the forecasts of 13 economic analysts consulted by Reuters is 0.1% for the GDP, compared to the last quarter of 2020 when an increase of 3.3% was reported, according to INEGI figures.

Expectations were adjusted following the release of INEGI's IGAE, which fell 5.1% y/y, more than expected by the institute itself: -4.0%, mainly due to declines in the services and manufacturing sectors. Timely data from INEGI, detailed that services activity, an important component in the calculation of GDP, fell 32.8% last March compared to the same month in 2020.

Six quarters of decline

Latin America's second largest economy suffered a contraction of 8.5% in 2020, its worst performance since 1932 during the Great Depression, due to the devastating blow of the pandemic. On a year-on-year basis, GDP would have registered a 3.5% decline in the first quarter, compared to a 4.3% drop in original figures for the previous period, according to the Reuters poll. If the projection materializes, it would make six consecutive quarters of decline.

In the first weeks of this year, some productive and social activities continued to be suspended due to restrictions imposed by the authorities. Additionally, Mexico was affected during February by a shortage of natural gas as a result of an extreme cold wave in the United States, especially in Texas, which caused power outages and factory closures in the northern states of the Latin American country.