July 31, 2019 / 10:00 AM / 4 months ago

Has Mexico escaped recession? Second-quarter data will show

MEXICO CITY, July 31 (Reuters) - Mexico will on Wednesday learn whether the country slipped into recession during the first half of 2019, in what would be a major blow to President Andres Manuel Lopez Obrador’s pledge to lift growth and confound critics of his economic policies.

The national statistics agency will at 6 a.m. (1100 GMT) publish a preliminary estimate for gross domestic product (GDP) in the second quarter, following a January-March period in which the economy shrank 0.2% quarter-on-quarter.

Monthly data showed the economy expanded by 0.1% in April and was flat in May, so June’s economic performance may be decisive in determining whether Mexico is in recession.

There is no established global definition for the phenomenon, but economists generally define two consecutive quarters of negative GDP as a technical recession.

The government has rejected the suggestion that the country is in a slump, and Lopez Obrador on Monday was adamant that Mexico is not in a recession.

A Reuters poll of economists last week forecast the statistics agency would show GDP was flat in the quarter - which would avoid recession, but still be another setback for the president’s promise to energize the sluggish economy.

Investor confidence in Mexico has been shaken by some of Lopez Obrador’s decisions as a leftist exponent of economic nationalism who took office in December vowing to reduce chronic inequality and deliver average annual growth of 4%.

In particular, his decision to cancel a partly built $13 billion new Mexico City airport and his retreat from the prior government’s opening of the oil and gas industry to private capital have raised doubts about his economic credentials.

During the past few months, private and public sector analysts have pared back their Mexican growth forecasts, with some now predicting little expansion at all in 2019. Lopez Obrador said he expects growth of 2% this year.

The president has attacked critics of his policies as supporters of what he has characterized as a corrupt “neo-liberal” era that preceded his time in office.

However, he has also had to contend with the risk of economic disruption from the United States, the destination for around 80% of Mexico’s goods exports.

At the start of June, Mexico faced a week of uncertainty after U.S. President Donald Trump threatened to slap duties on all of its U.S-bound exports if Lopez Obrador did not contain a surge in illegal immigration from Central America. (Reporting by Dave Graham; Editing by Cynthia Osterman)

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