Mexico's economy shrank 8.2 percent in the first quarter, even before the swine flu stalled commerce, and appears headed for its biggest contraction since the Tequila Crisis stalled growth in 1995. The decline was led by a 13.8 percent plunge in manufacturing activity, followed by a 7.7 percent drop in construction compared to the same quarter of 2008, the national statistics agency announced Wednesday. Economists at Grupo Financiero Banamex, one of Mexico's biggest banks, had predicted a 7.7 percent contraction overall.
Finance Minister Agustin Carstens declared Mexico in recession on May 7, predicting its economy would shrink by 4.1 percent this year.The Central Bank forecasts a 4.8 percent contraction, while Banamex expects negative growth of 5.2 percent. Mexico has been pummeled as U.S. economic woes drive down exports, foreign investment, tourism and money sent home by migrants, four main pillars of Mexico's $1 trillion economy.
The global economic crisis has also choked credit for Mexican companies and consumers, all but ending a half-decade explosion in lending. And the crisis weakened currencies across emerging markets, sending Mexico's peso tumbling by as much as a third against the U.S. dollar and costing local companies steep losses on derivatives bets on the peso.
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