MEXICO CITY: Mexico’s economy last year suffered its biggest annual contraction since the 1930s, although it recovered better than expected from the impact of the COVID-19 pandemic during the final quarter, preliminary data showed on Friday.

Gross domestic product (GDP) in Latin America’s second-biggest economy shrank by 8.5% last year in seasonally-adjusted terms, the preliminary estimate issued by national statistics agency INEGI found.

The slump was the worst since 1932 during the Great Depression, data published by the National Autonomous University of Mexico (UNAM) showed.

The annual GDP decline was slightly less than the consensus forecast in a Reuters poll this week for a contraction of 8.8%.

During the final three months of 2020, GDP advanced by 3.1% from the previous quarter in adjusted terms, beating the prediction for 2.8% growth seen in a Reuters poll.

Nikhil Sanghani, an economist at Capital Economics, said the figures for the fourth quarter meant that Mexico had recouped more than 70% of its losses from the first half of 2020.

“However, the recent surge in new COVID-19 cases will cause the recovery to grind to a halt in Q1,” he said.

The second quarter bore the brunt of the disruptions to economic activity caused by the pandemic, but a jump in infections towards the end of 2020 led to fresh restrictions in the Mexico City metropolitan area that have dented the recovery.

A breakdown of the unadjusted 2020 GDP figures showed manufacturing took the biggest hit last year. Secondary activities, which encompass factory output, fell by 10%, while tertiary activities, which include services, declined by 7.7%.

By contrast, primary activities such as farming, fishing and forestry, rose by 2.0% from 2019, the data showed.

Compared with the same quarter in 2019, GDP shrank 4.5% in unadjusted terms in the October-December period, INEGI said.