Mexico’s economy grew 5% in 2021, but ended in recession

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Mexico City (AFP) – Mexico’s economy grew 5% in 2021 but slipped into a technical recession at the end of the year as Latin America’s second-largest economy contracted for a second straight quarter, data showed on Monday. preliminary official.

Gross domestic product (GDP) fell 0.1% in the three months to December from the previous quarter, when the economy shrank 0.4%, national statistics institute INEGI reported.

The data “confirmed that the economy entered a recession in the second half of 2021, and we believe growth this year will be weaker than expected,” advisory firm Capital Economics warned.

A technical recession is generally defined as two consecutive quarters of declining GDP.

Analysts polled by the central bank expect the economy to grow 2.7% in 2022.

Mexico’s economy shrank 8.4% in 2020 – the worst crisis since the Great Depression some nine decades ago, as soaring coronavirus infections prompted mass shutdowns.

Mexico has been particularly hard hit by the pandemic, with 4.9 million cases of Covid-19 and more than 300,000 deaths in the country of 126 million people.

It is now experiencing a slower economic recovery than the United States and is also facing soaring consumer prices, noted Gabriela Siller, head of analysis for the financial group BASE.

The second consecutive quarterly contraction “confirms that Mexico has fallen into the so-called double dip or ‘W’ shaped recovery,” she tweeted.

“High inflation and falling GDP in the second half of 2021 suggest that the Mexican economy is going through stagflation, a situation not seen in Mexico since the 1980s,” she added.

Mexican inflation hit 7.37% year-on-year in November, the highest since 2001.

In response, the central bank raised its benchmark interest rate for the fifth consecutive time in December, to 5.5%, in an attempt to rein in consumer prices.

INEGI said industrial activity, which accounts for almost a third of GDP, grew by 6.8% last year.

Services, representing 60% of GDP, grew by 4.2% while so-called primary activities – such as agriculture, fishing and the extraction of natural resources – increased by only 2.7%.

Rather than directly helping businesses, the government of President Andres Manuel Lopez Obrador has focused its pandemic recovery efforts on social programs and investments in public works, such as a new airport for Mexico City and an oil refinery in the south. -is.

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