MEXICO CITY (AP) — Mexico’s economy slowed in the third quarter, posting a slight contraction compared to the previous three months, but still well above the same quarter a year earlier, according to data released Thursday by its National Institute of Statistics and Geography.
Moody’s Analytics Latin America Director Alfredo Coutiño noted the effects of a surge of COVID-19 infections in August, supply-chain disruptions and a new law in Mexico aimed at eliminating outsourcing as among the factors responsible for the 0.4% quarterly contraction.
Mexico President Andrés Manuel López Obrador urged the public to “view calmly” the effects of the slowdown and said the economy would still finish the year with 6% growth due to growing employment and foreign investment. He said the number of workers now registered in the social security system was now higher than before the pandemic.
The economy’s third quarter performance was 4.7% above the same quarter last year.
The disappointing economic news came one day after the peso dropped 1%, closing Wednesday at 21.44 to the dollar. BASE Financial Group attributed the peso's plunge to the surprise announcement that Victoria Rodríguez Ceja would be López Obrador's nominee to lead the central bank after withdrawing the nomination of Arturo Herrera. Rodríguez Ceja is the undersecretary for expenditures at the Treasury and will face confirmation.
Mexico’s economy is recovering from the crisis provoked by the pandemic, in large part thanks to strong economic growth in the United States, which is driving Mexican exports, especially manufacturing products, Coutiño wrote in a report Thursday.
Strong remittances from Mexicans working outside the country are also helping.
But Coutiño had a lower forecast for Mexico’s annual growth than the president. Despite demand gradually improvement, he saw potential drags including the government’s push to implement measures that limit competition. He expects annual growth of 5.3% following last year’s 8.2% contraction.