Mexico’s economy expected to grow in Q2, but at slower pace

4:56 pm Monday, July 25th, 2022

MEXICO CITY (Reuters) -Mexico’s economy likely expanded for a third consecutive quarter between April and June, although at a lower rate due to the economic fallout of Russia’s war in Ukraine and COVID-19 lockdowns in China, a Reuters poll showed Monday.

Gross domestic product (GDP) is expected to have expanded 0.8% in the second quarter from the first quarter, in seasonally adjusted terms, according to the median forecast of 12 analysts.

Latin America’s second-largest economy grew 1% in the first quarter in seasonally-adjusted terms.

“The result would be favorable and driven mainly by the strength of external demand,” Grupo Financiero Banorte said in an analysts’ report.

“However, in our opinion, the outlook deteriorated over time, hit by greater external shocks, as well as a moderation in domestic momentum,” Banorte said.

Mexico’s economy is forecast to have grown 1.4% year-on-year in the second quarter, the poll showed, down from 1.8% growth in non-seasonally adjusted terms in the first quarter.

“We expect activity to slow during the rest of 2022, giving a cumulative GDP growth of 1.5% for 2022,” analysts from Citibanamex noted.

The fortunes of Mexico’s economy could take a turn for the worse in the months ahead as deteriorating global economic headwinds loom.

“Given the increasing probability of a global recession within the next 12 months, Mexico would be unable to avoid an economic contraction caused by a recession in the United States,” said Alfredo Coutino, head of Latin America Economic Research at Moody’s Analytics.

In this scenario, Coutino forecasts that by mid-2023 Mexico falls into a recession that last three quarters, coupled with prolonged inflation.

Mexico’s national statistics agency INEGI is scheduled to publish the second-quarter preliminary GDP data on Friday morning.

(Reporting by Noe Torres; Additional reporting by Gabriel Burin in Buenos Aires and Kylie Madry in Mexico City; Writing by Valentine Hilaire; Editing by Anthony Esposito, Lisa Shumaker and Marguerita Choy)