Mexico to escape recession after floods, but risks to growth rise: Reuters poll

Wed Sep 25, 2013 7:05pm EDT
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By Dave Graham and Jean Arce

MEXICO CITY (Reuters) - Mexico is unlikely to be dragged into recession by severe flooding that has laid waste to large areas of farmland, destroyed homes and killed dozens of people, but the flooding has increased risk, a Reuters poll showed on Wednesday.

Mexican gross domestic product (GDP) suffered a surprise contraction of 0.7 percent in the second quarter compared with the previous three month period after eking out growth of less than one tenth of a point in the January-March period.

That stumbling performance has put Latin America's second biggest economy on track for its worst year since 2009.

A survey of 16 economists by Reuters said the floods that swamped Mexico after tropical storms Ingrid and Manuel bore down from the Atlantic and the Pacific on Sept 14-15 could shave a few tenths of a percentage point from GDP growth.

But with the economy showing some signs of recovery, none of them currently forecasts a recession in the third quarter.

"I don't know if it's going to be a recession, but it's going to be very weak," said Eugenio Aleman, an economist at Wells Fargo Bank in Charlotte, North Carolina.

A recession is generally defined as two consecutive quarters of contraction. Economists differed about how severe the short term impact of the flooding would be, and the most pessimistic estimated it could subtract up to 0.5 points off the end result.

The government last month cut its is growth forecast for this year to 1.8 percent, from just over 3 percent.   Continued...

A woman stands amidst the debris of her destroyed home in Agua Caliente, on the outskirts of Acapulco September 20, 2013. REUTERS/Claudio Vargas