Mexico: GDP collapses at unprecedented rate in Q2 on Covid-19 fallout
The economy contracted at a record-breaking pace in Q2 due to the suspension of non-essential activities during April and May as part of the measures enacted to quell the spread of Covid-19. According to a second estimate released by the INEGI on 26 August, GDP plummeted 18.7% on an annual basis in Q2, revised slightly upwards from the 18.9% decline reported in the flash estimate (Q1: -1.3% yoy).
The unparalleled downturn reflected a broad-based contraction across virtually all sectors of the economy. Industrial sector output crashed 25.7% year-on-year (Q1: -2.6% yoy), with both manufacturing and construction activity taking the hardest hit. Similarly, the services sector—the economy’s engine of growth—contracted a whopping 16.2% compared to Q2 2019 (Q1: -0.7% yoy), with the hospitality and leisure industries shrinking by over two thirds due to the restrictions put in place. Lastly, primary sector activity slipped 0.5% in annual terms in Q2, swinging from a modest 0.9% expansion recorded in Q1.
On a seasonally-adjusted quarter-on-quarter basis, GDP sank an unprecedented 17.1% in Q2, following Q1’s 1.2% fall.
The Covid-19 pandemic will prompt a severe economic downturn this year. Massive job losses will hammer household spending, although upbeat remittances should help to cushion the blow somewhat. Downbeat confidence and elevated uncertainty will pummel investment, while depressed foreign demand and a struggling auto sector will batter exports.