Mexico’s economy contracts by 18.7% due to the COVID-19 crisis, faces grim forecast

Mexico’s economy contracted 18.7% in the second quarter compared with the same period a year earlier, reflecting the impact of the COVID-19 lockdown on most activities in the country.

Mexico’s National Institute of Statistics and Geography said Wednesday that gross domestic product plunged in the second quarter 17.1% from what it had been in the first three months of the year.

The ugly numbers had been expected. Mexico suspended much of its economic activity and urged people to stay at home beginning in late March. Parts of the economy gradually began to reopen in June.

Secondary activities, such as manufacturing, construction, and the energy sector, were particularly hard hit, dropping 25.7% in the second quarter. Services fell 16.2%, while primary activities, including agriculture and forestry, only receded slightly, by 0.2%.

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On Wednesday, Mexico’s central bank Banxico predicted that the economy could contract by as much as 12.8% for the year as a whole, if the worst-case scenarios came to pass.

That scenario supposes “that the weakness in economic activity caused by the shock in the first half of 2020 extends throughout the rest of the year, because of a possible intensification of the pandemic or renewed, larger outbreaks on a world level,” Banxico said in a report.

Mexico’s economy was already in recession before it confirmed its first COVID-19 case on February 28; the economy contracted 0.3% in 2019 and analysts expect it to shrink at least 9% this year. More than a million jobs in the formal economy have been lost this year, but more than half of Mexicans work in the informal sector where the losses are believed to have been even worse.

As of August 26, Mexico has reported more than 573,000 COVID-19 infections and more than 62,000 deaths.

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