Mexico maintains its GDP growth target despite a recent contraction, highlighting the economic risks posed by potential US tariffs.
Mexico remains optimistic about its economic outlook, maintaining a GDP growth target of 2% to 3% for the year. The finance ministry stated on Thursday that there are no indications of a prolonged economic downturn that would lead to a recession. However, the potential for U.S. President Donald Trump to impose a 25% tariff on Mexican imports casts a shadow of uncertainty over Latin America's second-largest economy.
Deputy Finance Minister Edgar Amador Zamora emphasized that Mexico is not currently facing a recession and the consequences of possible tariffs from its primary trading partner remain unclear. Despite this positive stance, preliminary data released by the national statistics agency INEGI revealed a contraction in GDP of 0.6% between October and December 2024 compared to the previous quarter. This marks the first quarter-on-quarter decline in over three years. A consecutive quarter of contraction would technically classify Mexico as being in a recession, a prospect that analysts have already raised concerns about.Gabriela Siller, economic analysis director at Grupo Financiero BASE, commented on the situation, stating that the 0.6% GDP drop in the last quarter of 2024 places Mexico on the brink of recession. She pointed to a clear slowdown in consumption, the component with the greatest influence on GDP. Despite these economic challenges, Mexico concluded 2024 with a fiscal deficit of 5.7% of GDP, slightly lower than the initial estimate. December witnessed a public sector fiscal deficit of 618.56 billion pesos ($30.28 billion), resulting in a total deficit of 1.66 trillion pesos for the entire year. Additionally, hydrocarbon revenues declined by 15.1% in real terms due to lower crude oil production, contributing to 2.8% of GDP. The finance ministry announced that Mexico will continue to hedge these revenues
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