Mexico: Economy records best reading since Q1 2020 in the first quarter
April 30, 2021
According to a preliminary estimate, GDP slid at a more moderate pace of 3.8% year-on-year in the first quarter, above the 4.3% contraction logged in the fourth quarter of last year. Q1's reading marked the best result since Q1 2020.
The services sector fell at a softer pace of 4.2% year-on-year in the first quarter (Q4 2020: -5.0% yoy), and the industrial sector dropped at a slightly milder rate of 3.0% (Q4 2020: -3.1% yoy). Meanwhile, growth in the primary sector eased to 2.8% in Q1 (Q4 2020: +4.8% yoy).
On a seasonally-adjusted quarter-on-quarter basis, economic growth waned markedly to 0.4% in Q1 from 3.3% in the previous period. All in all, the data suggests the economy was fairly resilient in the first quarter, notwithstanding power outages and tighter restrictions early in the period to tame surging Covid-19 cases.
Looking forward, economic activity should gain momentum as external demand—particularly in the U.S.—rebounds and the vaccine rollout continues at home. However, a possible resurgence of the virus, and an uncertain business environment as the president aims to strengthen the role of the public sector in the energy market, pose risks.
On the outlook, Alberto Ramos, economist at Goldman Sachs, commented:
“Given the strong performance of the economy in 4Q2020, additional expansion in 1Q2021 (despite a challenging Covid environment early in the quarter, and other disruptions impacting the manufacturing sector) and expectation of gradual but steady progress on the Covid vaccination front and strong external demand for the remainder of 2021 we expect real GDP growth to exceed 5.0% in 2021, with the growth momentum skewed towards 2H2021.”