- Mexico’s economy posted the first quarterly contraction since 2021, shrinking much more than expected on weaker domestic demand and uncertainty over tariffs by the US, the country’s top trade partner.
- Gross domestic product fell 0.6% in the fourth quarter, more than all forecasts in a Bloomberg survey of economists that had a -0.2% median estimate. From a year ago, GDP expanded 0.6%, below the 1% median projection, according to preliminary data published Thursday by the National Statistics Institute. For the full year 2024, Mexico’s GDP expanded by 1.5%.
- Latin America’s second-biggest economy is widely expected to slow for a fourth consecutive year in 2025 amid government retrenchment and tight fiscal conditions coupled with concern over policy direction in both Mexico and the US. Mexico’s President Claudia Sheinbaum — who started her term in October — is continuing to pledge strong local demand, while the threat of US tariffs on Mexico’s exports rattles markets and halts investments.
- Most Mexico-watchers had long projected a challenging year for the economy given still-high borrowing costs and concerns that the arrival of companies in the country — through a practice known as “nearshoring” — had not happened at the explosive pace some predicted.
- More recent developments, such as the election of US President Donald Trump, have pressured the exchange rate and now pose upside risks to inflation while threatening the central bank’s current easing cycle.
- Banco de Mexico Governor Victoria Rodriguez said recently that the bank could accelerate the pace of easing in the year’s first policy meetings, which start Feb. 6, following a string of quarter-point cuts.
(Source: Financial Post)