Mexico’s economy has contracted for the first time in several years, raising concerns about a potential recession as tensions with the United States increase and investor confidence diminishes.
As reported by Bloomberg, referencing preliminary data from the national statistics institute (INEGI), the Gross Domestic Product (GDP) decreased by 0.3% compared to the previous quarter, marking the first year-on-year contraction since 2021.
This figure slightly exceeded the -0.4% median forecast provided by economists surveyed by Bloomberg, following a 0.6% growth in the second quarter. In comparison to the same period last year, GDP fell by 0.2%, just above the -0.3% estimate, according to the report.
“There has been a slowdown in aggregate demand due to a decline in consumption, investment, and government spending,” Bloomberg quoted Janneth Quiroz Zamora, the director of economic analysis at Monex Casa de Bolsa.
Banxico, the central bank of Mexico, reduced its benchmark interest rate by a quarter point to 7.50% in September, indicating potential for further easing as policymakers cautioned that ongoing trade uncertainty poses a threat to growth.
In January, President Claudia Sheinbaum initiated “Plan Mexico,” a government-led effort aimed at promoting development through local investment hubs and tax incentives. However, the program has faced challenges in attracting the anticipated foreign investment, hindered by uncertainties surrounding US trade policy and President Trump’s repeated tariff threats.
Nevertheless, exports provided a rare positive development, increasing by nearly 14% in September compared to the previous year.
Approximately 80% of Mexico’s exports are directed to the United States.
While US importers continue to encounter tariffs on steel, automobiles, and products outside the USMCA agreement, Sheinbaum has thus far managed to avoid broader penalties.
Earlier this week, Trump extended a reprieve on additional tariffs, describing it as “a positive step,” and highlighting that many Mexican imports are already taxed at levels he claims are beneficial to the US.
