Mexico’s Economy Slows Down in Q1 Despite Better-than-Expected Growth in Services

In the first quarter of 2021, Mexico’s economy experienced better-than-expected growth compared to the previous three months, according to preliminary estimates from national statistics agency INEGI. The country’s gross domestic product (GDP) expanded by 0.2% quarter-on-quarter, slightly higher than the 0.0% that economists had predicted. This growth was primarily driven by an increase in services, despite a downturn in the primary sector.

On a yearly basis, however, Mexico’s economy slowed down, with a 1.6% growth rate compared to the previous year. This was lower than the 2.5% growth seen in the previous quarter and below the projected 2.1% growth rate. Andres Abadia, Chief Latin America Economist at Pantheon Macroeconomics, noted that these figures confirmed a continued deceleration in economic growth in Q1. He identified several factors contributing to this slowdown, including tighter financial conditions, difficult external conditions, and increased infrastructure spending.

Despite this slowdown, Mexico’s economy has now expanded for ten consecutive quarters. Abadia pointed out that while this is a positive development for Mexico’s long-term economic prospects, it also suggests that the country is facing significant challenges in achieving sustainable economic growth in the coming quarters.

One of these challenges is tighter financial conditions due to high debt levels and rising interest rates. Additionally, difficult external conditions such as trade tensions with other countries are also affecting Mexico’s economic performance.

Infrastructure spending has also contributed to this slowdown as it can be costly and time-consuming to implement large projects like building new roads or expanding public transportation networks.

However, there are some bright spots for Mexico’s economy as well. For instance, pre-election support to households has boosted consumer spending and contributed significantly to recent economic growth trends.

Overall, while Mexico’s economy has shown resilience in recent years by expanding for ten consecutive quarters