Mexico's economy likely entered recession in fourth quarter

MEXICO CITY (Reuters) - Mexico's economy likely contracted in the last three months of 2021, in what would mark a second straight quarter of negative growth and put Latin America's second-largest economy in a technical recession, a Reuters survey showed on Friday. Gross domestic product (GDP) is expected to have shrunk in the fourth quarter by 0.3% from the previous three-month period in seasonally adjusted terms, according to the median forecast of a poll of 11 analysts.

The economy shrunk by 0.4% in the third quarter.

The poll forecast the economy expanded by 5.1% in 2021, after shrinking by 8.5% in the previous year in what was its worst recession since the Great Depression of the 1930s.

The poll forecast GDP growth of 1.9% for 2022. Analysts cited various factors to explain a fourth-quarter drop, including the spillover effects from a contraction in the third quarter, the ongoing fallout from the pandemic, reduced consumption due to higher inflation, bottlenecks in global supply chains and domestic policy decisions that have impacted private investment. "A heterogeneous and disorderly recovery was characteristic for all of 2021. In different sectors you saw contractions followed by growth and then followed by contractions," said Jesus Lopez, analyst at bank Banco Base.

Lopez said that performance will likely be repeated in the first quarter. In unadjusted terms, GDP is expected to have grown 1.6% on a year-on-year basis in the fourth quarter, according to the survey. Mexico's national statistics agency is due on Monday to publish the preliminary estimate for fourth-quarter GDP. Final GDP data will be published on Feb. 25.

(Reporting by Miguel Angel Gutierrez in Mexico City and Gabriel Burin in Buenos Aires; Writing by Anthony Esposito; Editing by Paul Simao)

By Miguel Gutierrez and Gabriel Burin