The Mexican economy exceeds expectations and grows 1.1% during the first quarter of the year

The Mexican economy has started off on the right foot in 2023. Despite the high interest rates in the country and the threat of still high inflation, the Gross Domestic Product (GDP) in Mexico grew 1.1% from January to March of this year, compared to the previous quarter, while at an annual rate the increase was 3.8% compared to the first quarter of 2022, the National Institute of Statistics and Geography (Inegi) revealed this Friday.

With this performance, the Mexican economic activity has spun six consecutive quarters of increases.

In the interior, consumption, services and commerce were the items with the greatest momentum from January to March 2023, growing 1.5%, compared to the previous quarter.

Industry reported an increase of 0.7%, also compared to the previous quarter, and, conversely, agricultural, fishing and mining activities reported a contraction at a monthly rate of 3.2%.

Inegi's estimate of the performance of Mexican economic activity exceeded the expectations of analysts who had predicted a rise of 0.8%.

The definitive data will be released by the Institute on May 24.

Gabriela Siller, Banco Base's director of analysis, points out that as a result of this good start, the Mexican economy could grow up to 2% this year.

However, they also warn of risks on the horizon, for example, a recession in the United States and therefore a future slowdown in exports sent to the northern neighbor and a lower income of remittances.

On the other hand, the analyst points out that consumption in the country has benefited from the increase in the wage bill, given the growth of employment and wages, due to the record entry of remittances into the country —in 2022 they exceeded 58,000 million dollars—as well as the support of the federal Administration.

“Consumption has been an internal engine of growth, but driven by the Government and external factors.

In addition, the growth in consumption is not accompanied by a sustained growth in gross fixed investment, which should be the internal engine of growth, since it also generates growth potential in the long term”, warns Siller.

In the first quarter of 2023, the Timely Estimate of Quarterly Gross Domestic Product #EOPIBT grew 1.1% compared to the previous quarter.

By component and quarterly rate, the variations were:

⬇️ 3.2%, primary

⬆️ 0.7%, secondary

⬆️ 1.5%, tertiary

(1/2) pic.twitter.com/Z9kIgHvRmW

— INEGI INFORMA (@INEGI_INFORMA) April 28, 2023

At the beginning of April, the International Monetary Fund announced that it expects the Mexican economy to grow 1.8% in 2023, after growth of 3.1% in 2022. The streak of rises in GDP has been accompanied by a fall in the price escalation, in mid-April the annual inflation rate in Mexico stood at 6.24%, its lowest level since October 2021. During the first 15 days of this month, the products that dropped the most in price were air transport, electricity and cucumber.

The good quarterly data in Mexico contrasts with the GDP data in the US. The US economy slowed down during the first part of the year to an annual rate of 1.1% and a quarterly rate of barely 0.3%, both figures, below analysts' expectations.

Although consumers continue to be the engine of the economy of the world's leading power, rate hikes have taken their toll on business investment and the real estate sector.

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