The economy slowed in the third quarter of 2021 compared to the second quarter but annual growth remained strong and President López Obrador still expects GDP to increase 6% this year.
The national statistics agency INEGI reported Thursday that the economy contracted 0.4% between July and September compared to the previous quarter.
Compared to the third quarter of 2020 – a year in which GDP slumped 8.5% due to the pandemic and associated restrictions – the economy expanded 4.7%.
Alfredo Coutiño, Latin America director at Moody’s Analytics, cited surging coronavirus cases in August, supply chain disruptions and a new law aimed at eliminating outsourcing as among the factors that caused the quarter-over-quarter decline.
But he noted in a report that the economy is recovering from the pandemic-induced economic crisis, largely due to strong growth in the United States, which is lifting demand for Mexican exports, especially manufacturing products. Record remittances are also aiding growth.
Coutiño is forecasting annual growth of 5.3% this year. While demand is improving, the government’s push to limit competition in some sectors – such as energy – could drag on the economy, he said.
Unsurprisingly, López Obrador is more optimistic. “The economy is growing and the forecast that we’re going to grow 6% this year will be met,” he said at his regular news conference on Thursday.
Mexico is currently on track to exceed that level of growth as the economy expanded 6.4% in the first nine months of the year compared to the same period of 2020.
The president said Mexico is in a V-shaped recovery after last year’s steep slump, asserting that there are “several indicators” that point to the good health of the economy.
“I believe that the best indicator is the creation of formal jobs and another indicator that also helps to know what is happening with regard to growth is foreign investment. In both cases … there are records, ” López Obrador said.
He said that the number of formal sector workers registered with the Mexican Social Security Institute (IMSS) is at an all-time high of almost 21 million. The Economy Ministry reported Monday that direct foreign investment rose 5.7% in the first nine months of the year to US $24.83 billion.
Among other signs of the good health of the economy, López Obrador said, are gains on the Mexican Stock Exchange and this year’s 15% increase to the minimum wage.