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  HOME | Mexico

Mexican Economy Shows a Greater Deceleration Than Anticipated

MEXICO CITY – The Mexican economy has recently been going through a greater-than-anticipated slowdown and saw a slump in growth rates, with a contraction in the first quarter and signs of weakness in the second that indicated the possibility of a slight recession, the Bank of Mexico (Banxico) said on Thursday.

“Economic activity in Mexico shows a greater deceleration than anticipated,” Banxico said in its report of the June 27 meeting of its governing board, which decided to maintain interbank interest rates at 8.25 percent.

“Growth rates already indicate the possibility of a slight recession,” Banxico said in the document.

The gross domestic product of the first quarter showed a contraction over the previous period with a 0.2-percent decrease in real terms, though the figures for April showed a marginal increase over the previous month in an environment in which weakness persists in most components of aggregate demand, according to the central bank.

However, most members of the Board of Governors stressed that growth in 2019 could be less than expected and one said it would likely hover around the lower limit of the range before registering some improvement in 2020.

One of the deputy governors of Banxico explained that the downward revisions have been due to a weaker international environment and internal factors. He added that the economy’s weakness was expected to persist while investments were falling and consumption rates had lost dynamism.

Among the external risks is the possibility that the new North American trade agreement between Mexico, the United States and Canada (USMCA) faces difficulties to be approved by the US and Canadian legislatures, as well as the threat of new US tariffs on Mexico.

Among the internal risks, there is the possibility of additional reductions in the country’s sovereign credit rating and a weaker performance by the state-owned Petroleos Mexicanos (Pemex), which is set to present its business plan for the next three years.

The Consumer Price Index, which determines general inflation, fell from 4.41 percent to 4 percent between April and the first half of June.

An assessment by Bank of America Merrill Lynch said that Mexico was in a technical recession, with the first-quarter GDP in evident contraction and clear signs of a fall in the second quarter, according to a document published on Thursday by the financial daily El Economista of Mexico.

The US dollar depreciated 0.47 percent on Thursday from 19.16 to 19.07 pesos, and the stock market gained 0.18 percent in its main indicator in anticipation of the announcement of the Pemex business plan that is expected to be released over the coming days.

 

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