Mexican economy suffers record contraction, slow recovery seen ahead
Mexico’s economy shrank by a record 17 percent during April as the coronavirus lockdown devastated economic activity, official data showed, and recovery is expected to be a long, hard slog with new infections still surging.
With factories closed, manufacturing took a big hit. So did hotels, restaurants and retail as consumers stayed home, Reuters reported.
Adjusted for seasonal swings, Latin America’s second-biggest economy contracted 17.3 percent from March, the biggest fall since modern data began being published in early 1993, according to figures put out by national statistics agency INEGI.
The decline, however, was milder than the 19.4 percent drop forecast by a Reuters poll of economists. In unadjusted terms, the economy shrank 19.9 percent in April compared with a year earlier.
The figures suggested gross domestic product (GDP) will decline 16 percent in the second quarter versus the previous quarter, said Joan Domene, senior economist at Oxford Economics.
“The uncontrolled spread of the virus prevents a timely and swift reopening, which adds a substantial risk to our third quarter forecast,” Domene added.
Mexico has the seventh highest coronavirus death toll in the world with 25,060 deaths and 202,951 cases.
A breakdown of the data showed that primary activities such as farming, fishing and mining shrank 6.4 percent from March. Secondary activities, which include manufacturing, plummeted 25.1 percent and tertiary activities, which cover the service sector, fell 14.4 percent.
Auto production almost ground to a halt in April, falling by 98.8 percent on the year, and the main industry group forecast output in the sector could drop by nearly a third in 2020.
The government hopes the economy fared slightly better in May, when authorities gradually began to permit sectors such as car making, mining and construction to start up again.
Still, the government’s reluctance to spend to support businesses and workers is seen weighing on the recovery.
That spending is worth only 1.0-1.5 percent of GDP and consists of “narrow-based and poorly targeted measures, with extremely limited support for the productive sector of the economy,” said Goldman Sachs economist Alberto Ramos.
This will likely to lead to a “deeper contraction and a shallower recovery,” Ramos added.