The agricultural sector is driving weak economic growth in Mexico in the first quarter

Mexico’s economy grew 3.3% year-over-year in March, a trend driven by the agriculture and services sectors. However, according to data from the national statistics agency INEGI, annual economic growth was only 1.9% in the first quarter (Q1).

The GDP of the primary sector, agriculture, grew by 4% annually in March, while the services sector grew by 3.8%.

Secondary or manufacturing sector GDP also increased year-on-year, but by a more modest 2.1%.

Compared to the last three months of last year, the economy grew by 0.3% in the first quarter.

Mexico’s economic growth shows signs of weakening

The annual growth rate of 1.9% for the January-March period is slightly lower than INEGI’s initial estimate of 2%. It is also by 0.6 points. percent lower than the rate recorded in the last quarter of 2023, which was 2.3%.

The newspaper El Economista reported that Mexico’s annual growth rate has been declining for six consecutive quarters.

The best performing sector in the first quarter was the services sector, which recorded 2.4% annual growth. However, this figure was the lowest year-over-year growth rate in any quarter since Q2 2022.

The secondary sector grew by 1.5% in the first quarter, while the primary sector grew by 0.7%. In the secondary sector, activity in construction increased by 10.7% compared to the previous year.

The dynamics in the construction sector remains high in the first quarter

Pamela Díaz Loubet, Mexican economist at BNP Paribas, said the construction sector has recovered thanks to government spending on infrastructure projects and private sector spending on facilities for companies relocating to Mexico as part of the nearshoring trend.

While impressive, the construction sector’s growth of 10.7% in the first quarter is well below the sector’s annual growth of 24.4% in the second quarter of last year, meaning construction boom slows down.

Commenting on the economy as a whole in light of the latest data, Pantheon Macroeconomics’ chief economist for Latin America, Andrés Abadia, said that “tighter financial conditions” and “challenging external conditions” are among the factors that have recently been limiting growth in Mexico.

The Bank of Mexico has set its benchmark interest rate at a record high of 11.25% for one year until it is set a 25 basis point cut in March.

In 2023, Mexico’s economy grew by 3.2%.but the growth rate is expected to slow this year.

The International Monetary Fund is currently forecasts growth of 2.4% this yearone sec consensus forecast of more than 30 banks, brokerages and research organizations recently surveyed by Citibanamex is that Mexico’s economy will grow by 2.2% in 2024.

From reports from El Financiero AND El Economista