Mexico's economy enters technical recession

A man with his dog "Doll" walks in front of closed stores in Mexico City, Saturday, Dec. 18, 2020. Mexico’s economy entered a technical recession at the end of 2021 with two consecutive quarters of contraction. (AP Photo/Ginnette Riquelme, File)

MEXICO CITY (AP) — Mexico’s economy entered a technical recession at the end of last year with two consecutive quarters of contraction despite annual growth of 5% for 2021.

Continuing issues with the global supply chain have been a problem for Mexican assembly plants. Despite COVID-19 infections falling late last year and there being few health-related restrictions, the economy struggled.

“The weakness of domestic production capacity has to do more with the structural damage caused by the pandemic and the lack of mitigation policies to help restore the level of productive investment,” said Alfredo Coutiño, Latin America director at Moody’s Analytics.

In the last three months of 2021, the economy dropped 0.1% compared to the previous three months, when it shrank 0.4%, according to the National Institute of Statistics and Geography.

Coutiño warned that the weakening in the latter half of last year could have consequences for growth in 2022, adding that government measures to limit competition have slowed private investment.

The 5% overall growth in 2021 followed an 8.4% contraction in 2020 when the coronavirus pandemic gripped Mexico.

The International Monetary Fund has forecast that Mexico's economy will grow 2.8% this year, while other analysts have said 2.7%.

Mexico Treasury Secretary Gabriel Yorio said last week that the economy would continue feeling the effects of COVID-19 this year.