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Mexico GDP Q4 2020

Mexico: Economy contracts at softer pace in Q4 2020

According to a preliminary reading, GDP contracted 4.5% on an annual basis in the final quarter of 2020 (Q3: -8.6% yoy), slightly beating market expectations and pointing to the ongoing recovery after the Covid-19 fallout pummeled activity in the first half of the year. On a seasonally-adjusted quarter-on-quarter basis, economic output rose 3.1% in Q4, down markedly from the unprecedented 12.0% surge logged in Q3. For the year as a whole, GDP plunged a staggering 8.3%—the sharpest contraction in decades and the second consecutive year of declining output (2019: -0.1%).

The softer annual downturn reflected a broad-based improvement across most major sectors of the economy. The industrial sector shrank a softer 3.3% year-on-year in Q4 (Q3: -8.8% yoy), largely on the back of recovering foreign demand—particularly from the U.S.—in the manufacturing segment. Similarly, services activity fell 5.1% on an annual basis after declining 8.8% in Q3. Lastly, agricultural production growth slowed from 7.7% in Q3 to a still-solid 4.8% in Q4.

Despite the positive developments highlighted by the data, risks have mounted recently amid the introduction of new restrictions in some states to contain rapidly rising Covid-19 cases, with the services sector in particular set to bear the brunt. As a result, a slow start to the year is expected, with uncertainties surrounding the evolution of the pandemic and vaccine rollout weighing on the near-term outlook.

The INEGI will release a second GDP estimate on 25 February.

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