Mexico’s economy expected to grow amid multiple challenges: Economist

Mexico’s economy is expected to grow next year though it faces multiple challenges, including the raging Covid-19 pandemic, according to an economist.

Mexico’s economy could see improved performance in the fourth quarter of this year, following a dip in gross domestic product in the third quarter, the first contraction in five quarters, Alejandro Saldana, chief economist for Mexico’s Ve por Mas financial group, has said.

In the third quarter, GDP grew at 4.6 per cent year-on-year, a drop of 0.2 per cent compared to the previous three months, according to preliminary estimates from the National Institute of Statistics and Geography.

“We estimate a better dynamism in activity during the fourth quarter, due to a broader economic reopening and the dilution of the effects of a law on employment, although bottlenecks will continue to limit industrial production,” Xinhua news agency quoted Saldana as saying.

“We reaffirm our GDP projection for 2021 and 2022, at 5.8 per cent and 2.6 per cent, respectively,” he said in a recent report.

Among the future risks, Saldana listed additional disruptions in global value chains, along with low investment in Mexico, implications of higher local and global inflation, and an accelerated withdrawal of monetary support.

Inflation in Mexico stood at 6.24 per cent year-on-year as of October, the highest level since December 2017, which motivated the central bank of Mexico to raise the benchmark interest rate this month to 5 per cent, the fourth hike in a row.

Spain’s insurance giant Mapfre Group forecast “increased pressure” on consumer prices in 2022 across the globe, especially in emerging countries such as Mexico.

A Mapfre report issued in November warned the global economy faces several shocks that are having a larger economic impact than first expected, such as supply chain disruptions caused by the pandemic, especially in the components industry.

That has led to an acceleration of global inflation, coupled with the rebound in global demand and energy restrictions.

The Mexican economy, the second largest in Latin America after Brazil, plunged 8.3 per cent in 2020 due to the pandemic, its worst performance since the 1930s.

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