The National Institute of Statistics and Geography’s (INEGI) preliminary figures released Thursday show that the Mexican economy will shrink by 0.6% during the fourth quarter of the year 2024.
Mexico’s economy, Latin America’s second largest, is facing growing challenges.
Market expectations were far exceeded by the 0.6% decline in GDP (gross domestic product) of the United States in the third quarter.
According to Reuters’ poll, the median forecast predicted a fall of 0.2%.
This 0.6% decline was lower than the estimates and reversed the positive growth in GDP of the previous quarter, which had been 1.1%.
This event is even more intriguing because it joins the long list of negative events in Mexico that occurred since the third quarter 2021, when the last recorded output was documented.
Many economists and politicians have expressed concern about this issue.
The decrease in Mexico’s GDP could add to economic pressures, which may lead to President Donald Trump imposing the 25% tariffs he promised on February 1st.
Performance of primary activities is down
This drop was caused by the decline in key industries.
Primary sector, which is agriculture, livestock and fishing, saw a huge 8.9% decrease in production compared with the last quarter.
The agriculture industry is suffering from ongoing problems, caused by harsh weather conditions and issues with specific supply chains.
The industrial sector also experienced a decline of 1.2%.
The annual figures are more positive despite the quarter-to-quarter dip.
The fourth quarter saw a 0.6% increase in Mexico’s GDP.
It appears that the economy is doing very well, as it has been reported all year long, even though there have been quarterly contractions.
The lower growth rate compared to previous years is a concern for the ability of the country to reach its full potential in the coming decade.
Central Bank Signals and Future Challenges
According to the Central Bank of Mexico, the reduction in economic activities is compatible with its estimate that further interest rate cuts could be needed this year.
In response to the inflationary pressures, and to the adverse effects of the tariffs placed by the US, the Bank of Mexico will rethink their monetary policies.
The US Government’s intent to increase tariffs on Mexican Imports by using the threat of tariffs has created an atmosphere of uncertainty, which requires quick responses from the nation.
It has a direct impact on Mexicans in their daily life, both with regard to employment and businesses.
Job losses, lowered consumer buying power and decreased domestic and international investment can all be caused by a contraction of the economy.
The pressure on policymakers to implement policies to improve the job market, protect most sectors and encourage economic growth will increase.
The government is increasingly requesting infrastructure, educational, and technological investment as it works to address the concerns.
What is the impact of Mexico’s GDP contraction?
Unexpectedly, the Mexican economy experienced a downturn in the 4th quarter of 2024. This served as a reminder to the ongoing problems of this country.
The only way to move forward in the face of the adversities caused mainly by internal difficulties and foreign activities is for Mexican officials be very clear about the economic strategy they want.
All stakeholders in the Mexican Economy must work together to achieve growth and stability in spite of the changing conditions.
The post Mexico’s Economy Sees First Contract in Three Years: GDP Falls 0.6% in Q4 2020 may be updated as new information unfolds.
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