Mexico GDP shrinks 0.2 pct amid NAFTA uncertainty, disasters

Markets Associated Press

Mexico announced Tuesday that its economy shrank 0.2 percent in the third quarter compared with the previous period amid uncertainty related to renegotiations of the North American Free Trade Agreement and local slowdowns caused by natural disasters.

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Alfredo Coutino, Latin America director at Moody's Analytics, said the contraction came after Mexico posted GDP gains of 0.7 percent and 0.6 percent in the first two quarters and confirms an expected deceleration in the second half of 2017.

"Investment decisions were affected by uncertainty over the possibility that NAFTA negotiations would break off," Coutino wrote in a report. He added that monetary tightening and high inflation "restrained consumption," while "activity was partially interrupted in cities affected by the two earthquakes in September and the hurricanes that struck the southern part of the country."

The government's National Institute of Statistics and Geography reported the contraction and said that GDP for the third quarter was 1.7 percent higher than in the same period last year.

Coutino forecast that Mexico's economy will grow about 1 percent in the fourth quarter and hit about 1.8 percent on the year, down from 2017 and short of target.