Mexico sharply cuts 2013 growth forecast to 1.8%

Mexico drastically cut its 2013 growth forecast on Tuesday after the economy shrank between April and June for the first quarterly contraction since the 2009 global financial crisis.

The finance ministry said in a statement that the gross domestic product was now expected to grow by 1.8 percent from a previous forecast of 3.1 percent. The government had already cut its prediction from 3.5 percent earlier this year.

The ministry said the Mexican economy was affected by a slowdown of external demand that began in 2012, as well as lackluster global economic activity.

The statement cited official data showing that the economy grew by a weaker-than-expected 1.5 percent in the second quarter compared to the same period last year and by just 1.0 percent in the first half of 2013.

The national statistics institute also said the economy contracted by 0.74 percent in the April to June period when compared to the first quarter. The agency attributed the contraction to a fall in services and industrial activity.

The statistics agency, INEGI, said the figures were based on a new methodology that follows international recommendations.

Mexico has recovered from a deep recession in 2009 that was sparked by the US financial crisis, and its economy grew by 3.9 percent last year.

But the government and central bank have cut their 2013 growth forecasts due to the disappointing start of the year.

The central bank has reduced its own forecast to between 2.0 and 3.0 percent.