The Mexican economy registered a historical contraction during the second quarter of the year, due to the brake on productive activities hit hard by the effects of the coronavirus pandemic, official data showed on Wednesday.
The Gross Domestic Product (GDP) decreased 17.1% between April and June compared to the previous quarter, due to the weak performance of industry and services, according to revised figures from the national statistical institute INEGI.
By components, the GDP of secondary activities -industry and manufacturing- decreased 23.4%, the tertiary -services- 15.1% and that of the primaries -agriculture- had a decline of 2%.
A preliminary estimate released at the end of July suggested that the second largest economy in Latin America had fallen at a rate of 17.3% in the period.
Still, it was their deepest setback at least since 1993, the oldest period for which data is available.
During April and May, a large part of the country’s productive activities were suspended due to restrictions imposed by the Government to contain the pandemic, which so far has left more than 568,000 infections and 61,450 deaths throughout the territory.
At year-on-year rate in original figures, GDP registered a decrease of 18.7% in the quarter, compared to 18.9% in the preliminary estimate in July.
The economy of Mexico will contract around 10% this year, in what financial authorities have said would be their deepest setback since the Great Depression of the 1930s.
In a separate report, INEGI reported on Wednesday that Mexico’s economic activity expanded 8.9% in June compared to the previous month, while the indicator fell by 13.2% compared to the same month of 2019.
THE ACTIVITY IN JUNE
Starting in June, a slow economic reactivation began that has not prevented more than 1.1 million formal jobs from being lost to date, although employment has been created in recent weeks.
Inegi also released this Wednesday the Global Indicator of Economic Activity (IGAE), a preliminary data from different sectors that shows the trend that the Mexican economy will have in the short term.
The IGAE for June fell 13.2% compared to the same month of the previous year due to a drop of industrial activities (16.7%), those of services (12.1%) and those of the sector agricultural (2%).
Positively, if the economic activity of June is compared to that of May, it grew by 8.9%, thanks to the industrial sector (17.9%) and services (6.2%), while the agricultural activities fell 4.5%.
THE FALL CONTINUES
Mexico has experienced almost zero or negative quarterly growth for more than a year.
In 2019, the country recorded a drop in its economy of 0.3%.
While for the first six months of this year, GDP accumulates a collapse of 10.1% of GDP.
In this way, the coronavirus crisis has aggravated an already very weakened economy.
According to the International Monetary Fund (IMF), the Mexican economy will fall this year by 10.5%, a very negative forecast in line with experts and other international bodies.
However, the president of Mexico, Andrés Manuel López Obrador, has been more optimistic about the economic recovery. He predicts that while the drop was abrupt, the economy will recover just as quickly.
He estimates that among the positive factors for the reactivation of the country is the entry into force on July 1 of the new trade agreement between Mexico, the United States and Canada (T-MEC) and the most emblematic public works such as the Mayan Train or the Dos Bocas refinery.
Upon assuming power, López Obrador promised to close his presidency in 2024 with a average growth of 4% of GDP.
The GDP of the second Latin American economy after Brazil increased by 2.1% in 2018 and 2017.
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