Mexico anticipated by 2025 a slowdown in its economy, but the fluctuations of the application and postponement of tariffs by the United States would have given a hard blow in the first quarter, when there are those who see them even a slight contraction to the persistent uncertainty.
If a fall in the Gross Domestic Product (GDP) is confirmed between January and March, as some experts, that of Mexico, the second largest economy in Latin America, would be facing a “technical recession” since in the last quarter of 2024 the indicator suffered its first decline in more than three years. For others, it is still premature to speak a more lasting contraction.
“The damage is already done, possibly follow a slight recovery in the second quarter, but this quarter is lost,” said Marco Oviedo, a senior strategist for Latin America of the firm XP Investments.
“Uncertainty still persists; It’s less, but persists, ”he said and then explain that Mexico should not resent so much, if they occur, retaliatory tariffs and that the government has said that it will continue to cooperate in Washington’s key demands on other issues such as fentanil and migration.
The most recent suspension and new extension of 25% tariffs by President Donald Trump, Thursday, gave a respite. But on April 2, the United States is expected to announce reciprocal tariffs. Mexico provides that this affectation be low because most of its exports to that country do not have tariffs due to the TMEC free trade agreement.
Forecasts about an economic contraction for the whole year, or low growth, in addition to the risks for sovereign rating have appeared more and more in the panorama, as well as suggestions that the Government could consider a prompt fiscal reform to raise collection and an anti -cyclical policy to increase public spending.
“The room (quarter) was negative, the first, we are already in the last month, it is anticipated that it remains weak and if it shows another slight contraction, as we hope Latin
The GDP contracted 0.6% at a deestalized rate in the last quarter of 2024 and growth was 1.2% for the whole year, the weakest from the pandemic. Although President Claudia Sheinbaum has reiterated that the economy is “strong” and that its recently launched Plan Mexico will help you give her, doubts persist.
It is premature to talk about recession
For the subgovernor of the Bank of Mexico (Banxico) Jonathan Heath “although there is the possibility of experiencing a small contraction in the first quarter”, it dismisses the references of a “technical recession” because it argues that the dissemination, depth or duration is not taken into account.
“It is clear that there will be a decrease in construction and in some manufacturing branches, but it is not clear that it will cover most of the economy, therefore we still have no indications of a sufficient diffusion to talk about recession. The negative rates that could occur in the first quarter, along with that of the anterior quarter will not necessarily be very significant, so we can apparently talk about depth, ”he told Reuters.
“I think it is very premature to talk about recession (…) We have to admit that we are going through a good stagnation streak caused to a large extent by prevailing uncertainty,” Heath added by arguing that gross fixed investment decisions are still limited by that reason and the possibility of an imminent renegotiation of the TMEC free trade agreement.
Recently, Banxico, the Central Bank of Mexico, cut in half its forecast for the growth of GDP from 2025 to 0.6% from 1.2% before claiming that “weakness” would be more noticeable in the first half. But the Ministry of Finance has maintained its expansion forecast of between 2% and 3%, as the budget of the year is contemplated.
Although there are still no early figures that could give lights on the behavior of GDP between January and March, the ballast of last year would continue to show deterioration. For example, gross fixed investment fell in December 2.6% desestationalized and private consumption gave 1.1% in the same month.
Last month, Fitch Ratings said that a generalized 25% tariff could take Mexico to a recession this year and said that its “BBB-” note, with a stable perspective, would face risks if possible “adverse” economic conditions of the country end up damaging public finances.
A former Mexican official who was linked to economic management in part of the previous government, and who spoke on a condition of anonymity, said that Trump’s “Stop and Go ‘maintains uncertainty, but once less credible.”
“I think we are going to walk about 0% growth in the year. The quarter perhaps is slightly negative, “he said, explaining that perhaps the Government will agree to” relax the tax issue a bit not to contribute to deceleration “which would imply giving space to a greater fiscal deficit to the fiance, 3.9% this year against almost 6% of 2024.
A recently released Reuters survey revealed that the risks to the economies of Mexico, Canada and the United States are accumulating in the midst of a chaotic implementation of US tariffs that have created deep uncertainties for companies and decision makers.
Of 14 economists who answered an additional question of the survey about the recession risks for Mexico, 10 said they had increased significantly and four that had increased marginally. None mentioned a panorama without changes or less risk of recession.
With Reuters information.
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