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Mexico GDP Q1 2021

Mexico: Third estimate shows the economy recorded the best result since Q1 2020 in the first quarter

According to a third estimate, GDP contracted at a slower rate of 3.6% year-on-year in the first quarter, above the 4.5% contraction recorded in the fourth quarter of last year. Q1’s reading marked the smallest drop since Q1 2020.

Private consumption slid at a more moderate pace of 4.2% year-on-year in the first quarter, which marked the best reading since Q1 2020 (Q4 2020: -7.3% yoy). Fixed investment contracted at a softer pace of 4.9% in Q1, compared to the 12.9% contraction in the previous quarter. Government consumption contracted 0.7% (Q4 2020: +1.6% yoy).

Exports of goods and services contracted 4.3% in Q1 (Q4 2020: +3.7% yoy). Conversely, imports of goods and services dropped at a slower rate of 1.0% in Q1 (Q4 2020: -6.6% yoy), marking the best reading since Q3 2019.

On a seasonally-adjusted quarter-on-quarter basis, economic growth moderated to 0.8% in Q1, down from the previous period’s 3.2% increase. Q1’s reading marked the worst reading since Q2 2020. That said, the data showed the economy remained robust in Q1, notwithstanding tougher Covid-19 restrictions at the outset of the year and some disruptions to manufacturing activity. Economic activity was particularly strong in March, registering a 2.6% month-on-month expansion, largely thanks to rapid growth in the services sector.

The stronger momentum registered at the end of Q1 is likely to have carried over to the second quarter, aided by declining Covid-19 cases at home, rebounding activity in the U.S. and improved sentiment.

Alberto Ramos, economist at Goldman Sachs, was fairly positive about the outlook:

“We expect the recovery to continue and firm in 2021 supported by further easing of social distancing protocols with the vaccination of a significant part of the general population by 2H2021. Positive spillovers from solid U.S. real GDP and income growth (which should leverage exports and tourism and remittances flows), stronger terms of trade, and the lagged effects from monetary policy easing should support the recovery.”

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