Investment in Mexico

Mexico - Investment

GDP growth returns in the second quarter on stronger external sector and public spending

GDP growth sped up to 1.5% on a seasonally-adjusted quarter-on-quarter basis in the second quarter, from 1.1% in the first quarter, according to a third national accounts estimate which included a breakdown by expenditure.

Private consumption growth waned to 1.9% seasonally-adjusted quarter-on-quarter in Q2 from a 3.0% expansion in Q1. Public consumption accelerated to a 2.6% expansion in Q2 (Q1: +0.8% s.a. qoq). Fixed investment growth fell to 0.5% in Q2, marking the worst result since Q2 2020 (Q1: +4.8% s.a. qoq).

On the external front, exports of goods and services rebounded, growing 2.9% in Q2 (Q1: -2.8% s.a. qoq). Conversely, imports of goods and services growth moderated to 0.2% in Q2 (Q1: +5.5% s.a. qoq), marking the worst reading since Q2 2020.

On an annual basis, economic growth accelerated to 19.6% in Q2, contrasting the previous period's 3.6% decrease.

Looking forward, analysts at the EIU painted a fairly downbeat picture:

“Despite improvements to the country's economic outlook, there are several unique factors that will hamper the country's growth prospects in 2021 and beyond. First, the lack of robust fiscal support measures for consumers and businesses in 2020-21 has caused permanent income losses. In this environment, business activity will recover more gradually than it would have done with extensive government support; this will have knock-on effects for private consumption amid slow jobs growth. Secondly, the government's erratic stance towards private investment will dampen investor confidence, taming the recovery in investment, which was already declining before the pandemic.”

The LatinFocus panel projects the economy to grow 5.9% in 2021, which is up 0.1 percentage points from last month’s forecast. For 2022, the panel sees GDP growth at 3.0%.