Mexico’s economy registered small growth in the first quarter of 2024 compared to the period of the previous three months, this while the Bank of Mexico ‘debate’ whether it’s time for a further interest rate cut at next week’s meeting.
The Gross Domestic Product (GDP) of Mexico grew 0.2 percent quarterly in the January-March period, slightly above the 0.1 percent estimate of economists surveyed by Bloomberg, according to the timely estimate of the National Institute of Statistics and Geography (Inegi) published this April 30.
Until last week, Inegi data showed that the economy could contract by 0.1 percent due to the slow start of the year and its gradual recovery.
Despite exceeding expectations, quarterly growth of 0.2 percent It is the weakest start to the year for economic activity since the 1.2 percent drop in 2020 due to the COVID pandemic, according to seasonally adjusted figures.
In the annual comparisonMexico’s economy rose 2 percent in the first quarter of 2024 compared to the same period, but in 2023, below the estimate of 2.3 percent,
What were the economic activities that grew the most?
The ‘engine’ of growth were tertiary or service activitieswhose growth was 0.7 percent quarterly, accelerating from 0.3 percent in the immediately previous period.
By contrast, secondary or industrial activities They had a contraction of 0.4 percent, thus linking two periods with negative data, something that was not observed from the third quarter of 2019 to the second quarter of 2020.
Primary activities, linked to the countryside, fell 1.1 percent quarterly, which also linked two falls for the first time since 2019.
What are the prospects for Mexico’s economy?
Banorte analysts predict that economic activity will remain positive in the short termsupported by various factors, but the risks persist in specific sectors, such as in primary activities due to droughts in Mexico.
“Within the industry we continue to see a relevant contribution from construction. In services, fundamentals will probably remain strong, although we could see a moderation in some components due to the temporary suspension of the delivery of resources from social programs,” Banorte indicated.
Andrés Abadia, chief economist for Latam at Pantheon Macroeconomics, highlighted that in general, The data reflects the current trend of slow economic growth in Mexico.
“The impact of temporary factors that boosted growth in early 2023 eased in the fourth and first quarters, while tighter financial conditions and less favorable external conditions are putting pressure on,” the expert noted.
The second largest economy in Latin America It surpassed economists’ expectations for much of 2023 before headwinds, including strict financial conditions imposed by Banxico and the effect of the strong peso on remittances, finally slowed it.
It grew just 0.1 percent in the October-December period compared with the previous quarter, as manufacturing and construction activity contracted.
2023’s 3.2 percent domestic growth was driven in part by government spending in wellness programs and emblematic construction projects such as the Maya Train or Pemex’s Dos Bocas refinery. Investments by companies in operations to serve customers in Mexico’s northern neighbor, a process known as nearshoring, also gave a boost. President Andrés Manuel López Obrador has further increased spending ahead of the June presidential election, which could accelerate economic growth this year.
“Monthly activity rebounded in February. With solid labor market conditions and greater external demand, that indicates a rebound in GDP in the second quarter and continued growth in 2024,” predicted Felipe Hernández, Latin America economist at Bloomberg Economics, in a note before the publication of the data.
2024-04-30 12:55:51