By Anthony Harrup

MEXICO CITY--The Bank of Mexico moderated its expectations for this year's economic contraction following a rebound in activity in the third quarter.

The central bank expects gross domestic product, a measure of output in goods and services, to shrink between 8.7% and 9.3% from 2019. Previously, the bank's estimate ranged from a decline of 8.8% to one of 12.8%.

"Although available information shows the economy had a gradual recovery from the effects of the second quarter, fueled by the reopening of different activities and greater mobility among the population, it's still below levels prior to the health emergency," the bank said Wednesday in its quarterly report.

A number of private economists have also revised their most dire estimates since economic output rebounded 12% in the third quarter from a record 17.1% contraction in the second when many businesses were closed to slow the spread of the coronavirus.

Revised third-quarter GDP data are due to be published Thursday.

The Bank of Mexico said it expects GDP to expand 3.3% in 2021 and 2.6% in 2022, reflecting a gradual recovery in the global economy, with consumers and investors still cautious about the pandemic.

The Bank of Mexico kept interest rates unchanged at its Nov. 12 monetary policy meeting, pausing after 11 consecutive rate cuts saying it wants to make certain that inflation, which rose to 4.1% in October, was returning toward its 3% target.

That was followed by a surprise drop in inflation in mid-November to 3.4%, partly as a result of this year's Black Friday-style shopping event being extended to avoid crowding at stores, which led to a drop in prices of numerous goods and services.

The Bank of Mexico now sees inflation averaging 3.6% in the fourth quarter the year, down from 3.7% earlier, but raised its forecasts slightly for 2021.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

11-25-20 1442ET