Mexico says economy contracted 8.5 per cent in 2020

MEXICO CITY (AFP) – Mexico’s pandemic-ravaged economy, the second largest in Latin America, shrank 8.5 per cent in 2020, official data showed on Friday, in what analysts said was the worst slump since the Great Depression.

While a rebound in the second half of last year helped to prevent an even steeper decline, concerns are mounting about the impact of a new spike in COVID-19 cases.

The Mexican economy grew 3.1 per cent in the final quarter of 2020, after increasing 12 per cent in the third quarter, the government statistics agency INEGI reported.

The full-year contraction was slightly smaller than the nine per cent drop forecast by analysts consulted monthly by the Mexican central bank.

Even so, the 8.5 per cent plunge “marks the biggest annual slump in Mexico since the Great Depression”, some nine decades ago, the Capital Economics consultancy firm said in a note to clients.

The fourth quarter rebound means that the economy has now recovered more than 70 per cent of its losses from the first half of 2020, it noted.

“However, the recent surge in new COVID-19 cases will cause the recovery to grind to a halt in the first quarter,” it warned.

Workers bag onions inside the Central de Abastos, Mexico City’s main market. PHOTO: AP

In the second quarter, as the pandemic hit hard, gross domestic product (GDP) dropped by a record 17 per cent.

Mexico, with 126 million people, closed all but essential businesses last March because of the pandemic, dealing a devastating blow to its economy.

It began to re-open some sectors in July, but re-imposed restrictions as COVID-19 cases soared later in the year.

Mexico City has been in a state of maximum alert since mid-December and most non-essential activities have been suspended in the capital.

The country has one of the world’s highest death tolls from the pandemic at more than 155,000, along with more than 1.8 million known cases of infection.

Both new cases and deaths have set daily records this month, leaving hospitals overwhelmed.

The country began mass vaccination on December 24 but like many nations it is struggling to acquire enough doses.

The International Monetary Fund predicted on Tuesday that Mexico’s economy will grow 4.3 per cent in 2021, upgrading an earlier forecast.