UPDATE 2-Mexican economy extends contraction in March but rebound likely

·1 min read

(Adds comment from central bank member)

MEXICO CITY, April 19 (Reuters) - Mexico's economy extended its losing streak in March, shrinking by more than 2%, while analysts expect a rebound in subsequent months as the pandemic subsides and the spillover effects of economic stimulus in top trade partner the United States kick in.

The Mexican economy contracted by 2.1% in March compared to the same month last year, preliminary data from national statistics agency INEGI showed on Monday, deepening Mexico's economic woes.

Latin America's second largest economy was already in a slight recession in 2019 and then contracted by 8.5% in 2020, its deepest dive in almost 90 years, because of the coronavirus pandemic. However, the economy recovered quicker than first estimated in the final quarter of 2020.

Secondary activities, which include manufacturing, were down 0.9% for the month while tertiary activities such as services slid 3.1%, according to the INEGI estimate.

A return to modest economic growth is forecast later this year for Mexico's economy as the United States begins to implement a nearly $2 trillion economic stimulus package enacted by President Joe Biden and his congressional allies.

Jonathan Heath, one of Bank of Mexico's five board members, said as of April the country should see "very large annual rates" of economic growth due to the low base of comparison.

"This should not be interpreted as a great achievement, but rather just as a rebound effect," Heath wrote on Twitter. (Reporting by David Alire Garcia; Additional reporting by Anthony Esposito; Editing by Frank Jack Daniel and Grant McCool)