The Mexican economy contracted in the last quarter of 2024 more than expected, adding pressures to the Central Bank (Banxico) to continue cutting its key rate, although the Government ruled out that it is the beginning of a recession.
The Gross Domestic Product (GDP) showed a quarterly decline of 0.6%, according to preliminary unstacilities published Thursday by the INEGI. Analysts anticipated a 0.2%contraction, according to a reuters survey.
“Banxico has tended to consider the weak results of GDP as a justification to cut interest rates. This publication is probable to feed the expectations of a 50 basic points cut at the meeting next week, ”said William Jackson, economic economist Economics.
Banxico currently has the referential rate by 10%, after five sales of 25 base points last year from its maximum 11.25%record, amid a moderation of inflation.
GDP is not part of the mandate of the monetary authority of the second largest economy in Latin America.
Lee: Mexican economy contracts in fourth quarter from 2024 to 0.6%, according to the preliminary data of the INEGI; It would be the first drop since the 3T of 2021
Even so, the Central Bank warned Friday that it could carry out deeper reductions as soon as in this year’s first monetary policy meetings.
Analysts consider, however, that greater monetary softenness will depend on Mexico to be able to overcome tariffs that the new US president Donald Trump has promised to impose as of Saturday. However, the Government of Claudia Sheinbaum believes that it will not and has said that it has a plan in case it occurs.
The next announcement of the monetary policy of Banxico is scheduled for February 6, and although the expectation is a new cut of 25 base points, according to the average of the most recent Citi survey, much of the market anticipates that the decline be a percentage point.
Albors of a recession?
With the fall of the fourth quarter, GDP suffered its first contraction since the fall of 0.9% of the third quarter of 2021, beaten by a deceleration of all its components.
He highlighted a collapse of 8.9% of primary activities -which include agriculture, fishing and mining -, its worst performance since 1999, which was attributed by authorities to the impact of a growing drought that ravages to the north of the country.
Thus, Mexico grew 1.3% in all 2024, with unstacted data. Although in original figures advanced 1.5%, a figure that was in the lower part of the range of between 1.5% and 2.5% provided by the government.
While analysts believe that forward the economy could continue to lose brios and even suffer a technical recession if another contraction is specified in the first quarter of 2025, the Government ruled out that possibility, ensuring that it maintains its expansion goal of between 2% and 3% for this year.
“It is important to note that this performance does not imply that the Mexican economy is in a recession or that entering one,” said the Undersecretary of the Treasury, Edgar Amador, at a press conference this Thursday.
At an annual rate, the GDP was moderated in the fourth quarter to 0.6% in original figures, from 1.6% of the previous quarter. The data was also less than the expectation of analysts, which were 1.2%.
With Reuters information
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