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Economic Growth in Mexico Slows Down, Raising Concern Over Recovery

Economic growth in Mexico slowed down significantly in the month of August, sparking concerns about the strength of the nation’s recovery.

Analysts had expected the economy to expand 0.2 % during the month, but it contracted 1.6%. What was surprising was that the tertiary activities, which cover the services sector, expanded barely 0.4%.

The drastic slowdown in commerce and services was the primary reason behind the poor performance, tweeted Jonathan Heath, deputy governor of the country’s Central Bank.

Mexico’s services industry has reported negative growth for a third consecutive month, largely due to a lack of policy support from the government.

“If Augusts’ slump continues into September, Mexico may see a 1.4% contraction in the third quarter,” according to Bloomberg Economics.

Analysts are blaming the government’s “underwhelming” response to the slowdown in the economic recovery.

Thanks to its free trade agreement with the United States and Canada, Mexico is enjoying robust external demand, but business confidence is declining in the country, largely due to policy uncertainty.

Supply chain disruptions, inflation, and high-interest rates will also weigh on industrial growth in the near future, say analysts.

Latin America’s second-biggest economy suffered a devastating economic blow last year when the COVID-19 pandemic broke out, forcing the government to impose travel restrictions.

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Mexico is still reporting a high number of covid cases, while the vaccination program moves at a slower pace.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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