According to preliminary estimates from Mexico’s national statistics agency INEGI, the country’s economy outperformed expectations in the first quarter of the year compared to the previous three months. The economy experienced a 0.2% growth in gross domestic product (GDP) on a quarter-on-quarter basis, slightly surpassing the 0.0% that economists had predicted. This growth was mainly driven by an increase in services, although there was a decline in the primary sector.
However, on a yearly basis, Mexico’s economy grew at a slower pace of 1.6%, compared to the same period last year. This growth rate was lower than the 2.5% seen in the previous quarter and below the expected 2.1% growth. Chief Latin America Economist at Pantheon Macroeconomics, Andres Abadia, attributed this slowdown to various challenges including tighter financial conditions, difficult external conditions, and increased infrastructure spending. These factors contributed to the overall deceleration of economic growth in the first quarter.
Despite this slowdown, Mexico’s economy has continued to grow for ten consecutive quarters. Abadia noted that while there is still growth momentum, it appears weaker compared to recent trends. The figures indicate that Mexico’s economic growth faced challenges in the first quarter but remains on a path of expansion.
In summary, while Mexico’s economy experienced better-than-expected performance in Q1 compared to Q4 of 2019 and Q1 of 2020, it grew at a slower pace than expected due to various challenges such as tighter financial conditions and increased infrastructure spending on a yearly basis. Despite this slowdown, Mexico has sustained its economic growth for ten consecutive quarters with weaker momentum than before.
Mexico has been experiencing significant changes over the past few years with political instability and economic uncertainty leading many investors away from investing opportunities within country borders or even altogether into other countries like Canada or United States.
One of these changes is NAFTA negotiations which have been ongoing since early 2017 when President Trump announced his intention to renegotiate NAFTA with Canada and Mexico.
Another change is Mexican President Andrés Manuel López Obrador’s leftist government policies which include increasing taxes on foreign companies operating within country borders as well as nationalizing key industries such as oil and gas production through state-owned company Petróleos Mexicanos (PEMEX).
These policy changes have led some investors to question whether doing business with Mexican companies will be risky due to potential nationalization or tax hikes.
Despite these changes, Mexico’s economy continues to grow steadily thanks largely to its oil industry which remains one of its largest contributors despite having been nationalized by López Obrador’s government.