Mexico Q3 2013 GDP Preview: Economists Sees Slow Recovery Of 0.7% Growth, Following Q2 Contraction

After an extremely disappointing second quarter and a steady drop in the yearly growth estimate for all of 2013, things may be looking up for Mexico in the third quarter -- if ever so modestly.

Predictions for the GDP report, expected to be released on Thursday, point to slight growth in the economy: a 0.7 percent expansion on a quarter-over-quarter basis; and 1 percent growth in comparison with last year, according to a Reuters poll.

“Mexico will recover some ground lost in the [second] quarter, but modestly,” Bill Adams, senior international economist with PNC Financial Services Group, told International Business Times. “This year has been very slow for Mexico, but we will begin to see some recovery in the last few months.”

In the second quarter, Mexico's economy contracted by 0.74 percent from the first quarter -- the first time in four years that GDP shrank. On an annualized basis, that decline translated into a loss of 2.9 percent.

Adams partly attributed the still-tepid economy in Mexico to continued sluggishness in its biggest trade partner and neighbor, U.S., as well as to a big drop in remittances sent by Mexican migrant laborers in foreign countries (now 29 percent below pre-recession levels). Other contributing factors include a weak construction sector in Mexico, and the recent declines in wholesale and retail sales data.

The Mexican government started scaling back its own GDP growth forecast for the year in August, when it downgraded its original 3.1 percent growth estimate to 1.8 percent, after the Insituto Nacional de Estadística y Geografía (National Institute of Statistics and Geography, or INEGI) published its disappointing report for the second quarter.

Some independent firms concur with the cautious stance. Although the Mexican economy is in a recovery mode, BBVA Research modified its economic forecasts for the fourth time this year, when it cut its 2013 GDP growth projection from 1.4 percent to 1.2 percent, reported the Mexican newspaper El Universal.

Nevertheless, some analysts remain quite optimistic about the near future. Capital Economics of London said it expected the Mexican economy to pick up in 2014, due to the easing of inflation in recent months and signs of strengthening demand from the U.S. The research firm expects an acceleration in growth -- to 4 percent in 2014, and as much as 4.3 percent in 2015.

INEGI will publish the GDP report on Thursday, Nov. 21, at 10 a.m. EST.