Economy shrinks in quarter of quakes

pulse

October 31, 2017 7:02 PM

Mexicos economy shrank for the first time in more than four years in the third quarter, hit by two powerful earthquakes in September, according to data released Tuesday.

If confirmed, the preliminary estimate of a 0.2-percent contraction would be the first quarter in the red for Latin America's second-largest economy since the second quarter of 2013.

It has been a topsy-turvy year for Mexico, which faced economic panic a year ago when Donald Trump won the US presidential election after a campaign charged with anti-Mexican rhetoric, raising fears for the country's key trade relationship with its giant northern neighbor.

Mexico shrugged off fears of catastrophe to post three quarters of moderate growth -- 0.7 percent in both the fourth quarter of 2016 and the first of 2017, and 0.6 percent in the second.

In late August, the central bank increased its annual growth forecast for 2017 to a range of 2.0 to 2.5 percent, up from its previous estimate of 1.5 to 2.5 percent.

But the peso, which plunged after Trump's victory, has been sinking again on uncertainty surrounding the testy negotiations on a new version of the North American Free Trade Agreement (NAFTA) between Mexico, the United States and Canada.

Then came the earthquakes that rocked the country on September 7 and 19, leaving 465 people dead and causing an estimated $2 billion in damage.

Coupled with several hurricanes and tropical storms, that dented economic growth.

Mexican officials have nevertheless voiced optimism that rebuilding from the quakes will give the economy a boost.

"Although some activities in the affected zones are still recovering, reconstruction efforts will be a significant boost to the dynamism of the economy in these regions," the finance ministry said Monday.

The economy's performance "was weaker than expected," said consulting firm Capital Economics in a note.

"But the data are provisional and are perhaps more likely than usual to be revised given the disruption caused by the twin earthquakes that struck in September."

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