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Latin America’s second-largest economy struggles amid sluggish Q3 growth


Latin America’s second-largest economy struggles amid sluggish Q3 growth

Photo: Forbes

A final reading of Mexico’s third quarter economic growth today will confirm the economy expanded marginally at a rate of 0.1% in the three months to September.

Latin America’s second-largest economy underperformed already dreary estimates of 0.2% to 0.3% growth. With a stagnant services sector and shrinking manufacturing, the reading represents a 0.4% year-on-year contraction, the first such occurrence since Q4 in 2009.

Though he has promised 4% annual growth, the Mexican economy has been sluggish so far under President Andres Manuel Lopez Obrador (AMLO). Q4 is likely to see similarly stagnant activity.

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With employment growth falling two points from 4% at the start of 2019, consumer spending is likely to slow over the coming months and prolong the country’s economic stagnation. Such prospects, along with a continued drop in oil revenue from the state-owned Pemex, will likely force a downgrade of both Pemex and Mexican bonds. This would spook investors, depriving the economy of much-needed investment in the medium term. To kickstart growth, look for AMLO to pursue wealth redistribution policies to stimulate lower and middle-class spending.

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