Mexico’s economy is entering a technical recession as GDP falls again Business and Economic News

Mexico’s economy has shrunk in the second quarter of the last quarter of 2021, according to official data released on Monday, putting it in a technical recession and joining Brazil’s regional power, whose economy returned to negative territory last year.

The gross domestic product of Latin America’s second largest economy (GDP) fell by 0.1% in the fourth quarter of the previous quarter in seasonally adjusted terms, according to preliminary data released by the Mexican National Institute of Statistics and Geography (INEGI).

This exceeded the expectations of the Reuters news agency survey to shrink GDP by 0.3% in the fourth quarter, after the economy fell by 0.4 percent in the third quarter.

Mexican Deputy Finance Minister Gabriel Yorio said Friday’s “technical recession”, defined as shrinking for two consecutive quarters, did not take into account the economic volatility associated with coronavirus and the global supply chain.

Yorio said global supply chain barriers, rising commodity prices and higher costs of land and sea transportation are growing the economy.

“With its poor quarterly result, Mexico has joined Brazil in the technical recession, a very disappointing result, leaving Mexico’s real GDP below 4 percent below the previous peak of COVID in mid-2019,” said Fiona Mackie, Latin America’s regional director and The Caribbean Economist In the Intelligence Unit.

Brazil’s weakened economy is in danger of deepening in recession ahead of the October presidential election, as voting anxieties and rising interest rates continue to hurt growth, according to a Reuters poll.

Jonathan Heath, a member of Mexico’s central bank board and one of its most significant, jumped around where the Mexican economy was at the end of last year.

“It’s a simplification of what is a recession because the economy has been in recession for two consecutive quarters with a negative GDP rate,” Heat said on Twitter.

“If there are two consecutive quarters of negative GDP, it increases the chances of a recession, but that’s not enough. A recession must meet three conditions: depth, duration, and extent. For now, we only meet the duration. ”

To keep the recovery slow

Renzo Merino, an analyst at Moody’s Investors Service, predicted that economic growth in 2022 will be lower than expected by the Mexican authorities, given the continued negative momentum in investment.

“It simply came to our notice then. [President Andres Manuel Lopez Obrador’s] within six years, given the potential for lower revenue performance and increasing public spending rigidity, ”Merino said.

Nikhil Sanghani, an economist in the booming markets of the Capital Economy, took a more optimistic view.

“We doubt that Mexico will be immersed in a recession any longer. The supply shortage seems to be easing, which should boost self-production as the drag on the exit of the subcontracting law soon begins to disappear, ”Sanghani said.

Sanghani expects the recovery to remain sluggish in the coming quarters, however, as a tightening of COVID-19 and a tightening of fiscal policy have hardened it.

INEGI data show that the third activity in the service economy fell by 0.7% in the fourth quarter of the previous three months, in seasonally adjusted terms.

“The decline of the intensive labor sector [is] This is a reflection of the impact of the recently approved outsourcing law, which has led to a sharp decline in the services provided to businesses and businesses, ”Goldman Sach economist Alberto Ramos said in a research note.

Primary activities, which included agriculture, fishing and mining, rose by 0.3 per cent, while secondary activities, including manufacturing, rose by 0.4 per cent.

The economy grew by 5 percent for the full year of 2021, data show that after declining by 8.5 percent in 2020, it was the worst recession in Mexico since the Great Depression of the 1930s.

“The strong growth in 2021 is the result of the arithmetic effect created by the low benchmark in 2020, and less so as a result of actual growth in production capacity,” said Alfredo Coutino, Moody’s Analytics chief analyst at Latin America.

GDP grew by 1.0% in the fourth quarter compared to the same period of the previous year, according to data.

INEGI will publish the final GDP data for the fourth quarter on 25 February.