The natural disasters that hit Mexico last August and September left more than material damage and human loss.
The gross domestic product of the Mexican economy in the third quarter fell by 0.3% compared to the previous quarter of this year – the first contraction in almost two years – according to a report by the National Institute of Statistics and Geography. The economy grew 1.6% in the third quarter of this year, while the same period in 2016 saw growth of 1.7%, Mexican website Expansión reported.
The economy contracted more than expected, due to the impact of storms and earthquakes on Mexican territory. “The [GDP] The deceleration is largely explained by a temporary and limited impact of natural disasters which affected oil production, as well as services related to education, tourism and recreation,” the finance ministry said in a statement. communicated.
Despite this economic setback, the Ministry of Finance estimates GDP growth of around 2 to 2.6% by the end of this year. “Based on the evolution of the economy and the results available, it continues to show that it is resilient,” Expansión quoted the ministry.
The Central Bank of Mexico, however, is less optimistic. This week, the bank cut its growth forecast to between 1.8 and 2.3 percent, Expansión said. In addition to natural disasters, other factors that could hamper Mexico’s economic growth include the country’s 2018 presidential elections, the unpredictability of global markets, and stalled talks to renegotiate the Northeast Free Trade Agreement. American or NAFTA.
Earlier this week, Mexico, Canada and the United States failed to settle their differences in the fifth round of talks to rework the trade deal, Reuters reported. Canada and Mexico have rejected President Donald Trump’s proposals for restrictions on Mexican and Canadian agricultural products and tougher rules on automotive content.
Trump has threatened to pull the United States out of the trade bloc if it is not revamped to better serve the country’s interests, the outlet noted. His outspoken rhetoric has spooked investors and is pushing Mexico to diversify its trade.
The Trump administration has also called for stricter enforcement of minimum wage laws among North American partners. Trump blames NAFTA for the loss of many American jobs due to cheap Mexican labor, which has attracted American companies for years, CNN Money reported.
And today, US-based manufacturers may still be attracted to Mexican labor. This week, the Mexican government agreed to raise the minimum wage from 80.04 pesos to 88.36 pesos ($4.70 at today’s exchange rate) effective December 1. will have the benefit of attracting more business, CNN Money added.
However, the lack of progress in NAFTA talks and Trump’s tougher demands could cause the trading bloc to crumble in the future, Reuters said.