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Mexico drops annual growth projection to 2.7% from nearly 4% after sluggish first quarter

People shop at a Costco in Mexico City Dec. 28, 2013. THE CANADIAN PRESS/AP, Dario Lopez-Mills

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People shop at a Costco in Mexico City Dec. 28, 2013. THE CANADIAN PRESS/AP, Dario Lopez-Mills

MEXICO CITY - The Mexican government said Friday that sluggish economic growth in the first quarter of this year has caused it to drop projections for 2014 to 2.7 per cent from the original 3.9 per cent.

Mexico's economy grew 1.8 per cent in the first quarter of this year, compared to the same period last year, when it had been expected to exceed 2 per cent, according to National Statistics Institute.

The weaker growth report came two days after Mexico's Central Bank also lowered the annual forecast for economic growth this year to between 2.3 and 3.3 per cent from the original 3-4 per cent.

Undersecretary of Finance Fernando Aportela said one reason was the slower growth in the U.S., which saw its weakest quarter since the end of 2012, mainly due to the harsh winter. Aportela said a new tax on sodas and junk food had an impact.

The administration of President Enrique Pena Nieto has made economic growth its top priority but has yet to meet its own projections. The administration won congressional approval of a package of reforms last year designed to boost investment and jobs, including energy, tax and fiscal reforms. But they have yet to be fully enacted.

Last year the government projected over 3 per cent annual growth and ended the year with 1.1 per cent. By contrast, Mexico grew close to 4 per cent a year in the final two years of previous President Felipe Calderon's term.

Alfredo Coutino, Latin America director for Moody's Analytics, said the first-quarter performance "is evidence that the economic weakness isn't cyclical, rather structural and a product of absence of the reforms."

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