(Adds cut to official growth estimate, deputy finance minister comments)
By Michael O‘Boyle
MEXICO CITY, May 21 (Reuters) - Mexico’s government on Thursday slashed its economic growth forecast to between 2.2 to 3.2 percent this year after data showed the economy grew at its slowest pace in over a year undermined by flagging oil revenue and weak U.S. growth.
The economy expanded by 0.4 percent in the January-March period compared with the fourth quarter, slowing from 0.7 percent growth in the fourth quarter, the national statistics agency said,
A steep drop in crude prices has hit government revenue from oil sales by state energy company Pemex, forcing the finance ministry to rein in its infrastructure spending.
Total exports to the United States, an engine of the economy, also slowed their expansion, as the U.S. economy grew only 0.2 percent at an annual rate in the first quarter.
The government cut its 2015 economic growth forecast a full percentage point from the previous outlook of 3.2-4.2 percent, Deputy Finance Minister Fernando Aportela said.
“The U.S. economy is expected to recover its dynamism during the year, which will strengthen Mexico’s non-oil exports,” Aportela told a news conference. He also said domestic demand was clearly improving following sluggish growth in recent years.
Analysts expect the Mexican economy will grow 2.7 percent in 2015, according to a Banamex poll on Wednesday.
“We need to see if oil output stabilizes,” said Alonso Cervera, an economist at Credit Suisse in Mexico City. “If crude production keeps falling, growth could be closer to 2 percent.”
Industrial output, which includes factory and crude oil production, fell 0.2 percent compared with the previous quarter, the steepest drop in nearly two years. Services slowed to 0.5 percent growth, the weakest in a year.
Already released statistics from Pemex have shown a drop in crude output in the first three months of the year.
On an annual basis, gross domestic product (GDP) grew 2.5 percent in the first quarter from the same period in 2014 . That was below the 2.6 percent pace reached in the fourth quarter.
A Reuters poll had forecast 2.4 percent growth for the year-on-year figure and 0.3 percent for the expansion in the first quarter versus the fourth quarter.
Mexico’s monthly economic activity index declined 0.6 percent in March compared with the prior month, the agency said in a separate report, the steepest drop in nearly 2 years as services contracted and industrial output was flat. (Additional reporting by Ana Isabel Martinez; Editing by Meredith Mazzilli and W Simon)