The Mexican economy recovered strongly in the third quarter of the year compared to the previous three months but GDP was still well below 2019 levels.
Economic activity increased 12% between July and September compared to the April-June quarter, according to preliminary statistics published Friday by Inegi, the national statistics institute.
However, on a year-over-year basis GDP was down 8.6% in the third quarter.
Still, the July-September result shows that the economy is heading in the right direction after suffering a record slump in the second quarter when GDP fell by almost 20% compared to the same period of 2019.
The 12% growth in the three-month period is the economy’s best performance from one quarter to the next in at least 30 years.
The second quarter included two full months – April and May – during which nonessential economic activities were suspended due to the coronavirus pandemic and the federal government urged people to stay at home.
Compared to the April-June period, the primary sector, which includes agriculture and fishing, expanded 7.4%. The secondary sector including manufacturing and mining grew 22% and the tertiary, or services, sector increased 8.6%, Inegi said.
According to the Latin American director for Moody’s Analytics, the strong performance of the economy is due to the recovery of economic activity in the United States, Mexico’s largest trading partner.
“The strong rebound in the third quarter was driven by the United States recovery,” Alfredo Coutino said.
Despite the strong recovery, the head of economic and financial research at Banco Base, Gabriela Siller, said that it is “highly probable” that the economy will again contract on an annual basis in the final quarter of 2020.
Threatening economic activity in the last months of the year is an increase in new coronavirus case numbers. October is on the verge of becoming the second worst month of the pandemic for new cases of the coronavirus, and there is a risk that more states will regress to red on the federal government’s stoplight map and tighter economic restrictions will be implemented.
The government of Jalisco, currently an orange light “high” risk state, took the decision this week to enforce stricter restrictions for a two-week period starting today due to an increase in new case numbers.
However, even if tighter rules become more widespread, the impact on the economy won’t be as big as earlier in the year, Economy Minister Graciela Márquez predicted this week.
During an appearance in Congress on Wednesday, Márquez noted that automotive, mining and construction are now considered essential activities and therefore won’t be forced to shut down – as occurred earlier this year – even if coronavirus cases spike considerably.
Finance Minister Arturo Herrera said a “full recovery” of the economy will occur once a coronavirus vaccine becomes available and widespread inoculation has occurred.
“We hope vaccines will arrive at the end of December or the start of January,” he said.
Foreign Minister Marcelo Ebrard said this week that a vaccine will be available by the end of March in a worst-case scenario but even if that prediction comes true, inoculation of the majority of the population would likely take months if not years.
Banco Base’s Siller said it will probably take six years for Mexico to get back to the GDP levels it had before the coronavirus-induced economic crisis.
But President López Obrador is more optimistic, asserting Friday that a V-shaped recovery is already underway.
“We’re now growing, our economy is recovering,” he said, citing the Inegi data. “Our forecast that we were going to drop due to the pandemic but recover quickly is coming true.”