Overview of Mexico’s Economic Performance
Mexico’s economy experienced a 0.3% annual contraction in the third quarter of 2022, according to the seasonally adjusted estimate of the Gross Domestic Product (GDP) released by the National Institute of Statistics and Geography (Inegi).
If confirmed in the final GDP report, scheduled for November 21, this will mark the first annual decline in economic activity since the fourth quarter of 2021.
Sectoral Performance
The annual GDP contraction in Q3 was primarily driven by a 2.9% decline in the secondary sector, which includes manufacturing, construction, mining, and energy generation.
The tertiary sector, comprising services and commerce, grew by 0.9% annually, down from 1.8% in the previous quarter. Meanwhile, primary activities, such as agriculture and livestock, expanded by 3% annually.
However, the growth in primary and tertiary sectors was insufficient to offset the industrial sector’s decline.
Expert Analysis
Gabriela Siller, the head of economic analysis at Banco Base, cautioned that it is unlikely the economy will reverse its stagnant performance in the final GDP report on November 21.
Even with a positive adjustment in the primary sector due to improved harvest conditions, it won’t compensate for the weakening industrial and service sectors.
Trimester Performance
Upon examining the July-September quarter, a 0.3% contraction in economic activity is observed, confirming the weakening of economic activity as previously noted by the Bank of Mexico since the third quarter of the previous year.
This marks the second consecutive quarterly decline in GDP since a 0.6% contraction in the last quarter of 2021.
However, annual performance shows a 0.3% GDP growth in Q1 and 0.6% in Q2, attributed to increased demand from foreign companies anticipating US tariffs, as identified by analysts and economists like Petya Koeva from the Fondo Monetario Internacional (FMI).
Sector-wise Breakdown
The third quarter data indicates that secondary activities, including industry and manufacturing, fell by 1.5% compared to the previous quarter, marking the first trimesterly decline of the year.
The 3.2% trimesterly growth in primary activities (agriculture and livestock) and 0.1% growth in tertiary activities (services and commerce) partially offset this decline.
Future Outlook
Alberto Ramos, Latin America economist at Goldman Sachs, stated that the third-quarter contraction was anticipated in their statistical model, maintaining their 2025 growth forecast at 0.5%.
Ramos expects real activity to be affected by internal and external policy uncertainty, diminished business confidence, and fiscal consolidation efforts.
Omar Mejía Castelazo, Banco de México’s subgovernor, recently mentioned in Washington that they predict an expansion of PIB slackness moving forward.
PIB slackness implies underutilization of resources due to suppressed demand.
Key Questions and Answers
- Q: What was Mexico’s annual GDP growth rate in Q3 2022? A: Mexico’s economy contracted by 0.3% annually in Q3 2022.
- Q: Which sectors contributed to the contraction? A: The secondary sector, including manufacturing, construction, mining, and energy generation, saw a 2.9% annual decline.
- Q: How did the tertiary and primary sectors perform? A: The tertiary sector grew by 0.9% annually, while the primary sector expanded by 3%.
- Q: What is the outlook for Mexico’s economy in 2025? A: Goldman Sachs predicts a 0.5% annual growth rate for Mexico’s economy in 2025.
- Q: What factors are expected to impact Mexico’s economic performance? A: Factors include policy uncertainty, diminished business confidence, and fiscal consolidation efforts.
