Mexico’s economy to shrink up to 1.8%

Published: January 28 2009 00:43 | Last updated: January 28 2009 00:43

The Mexican economy is heading towards a significant recession this year, contracting by as much as 1.8 per cent as it struggles to cope with the US financial crisis and global downturn, the country’s central bank forecast on Tuesday.

Guillermo Ortiz, the central bank president, said this year’s estimated economic growth now ranged between -0.8 per cent and -1.8 per cent. “The reduced perspectives of the Mexican economy in 2009 stem principally from the severe deterioration of the external environment,” he said.
EDITOR’S CHOICE
Mexico rebuffs ‘failed state’ claims - Jan-18
Mexico’s central bank cuts rates by 0.5% - Jan-17
Mexico poised to cut interest rates - Jan-16
Mexico rules out growth this year - Jan-09
Oil price drop casts cloud over Pemex reform - Dec-08
Mexico helpless as drugs war rages - Dec-03

At the same time, Mr Ortiz said that Mexico was likely to lose between 160,000 and 340,000 jobs this year – a particularly worrying prospect, given that the country’s relatively young population pushes 1m new people into the job market every year.

The central bank estimated inflation would finish the year at less than 4 per cent, within the bank’s target range of 2-4 per cent.

The estimates were well below those of Mexico’s finance ministry, which this month predicted that growth this year would be flat.

They also underline the growing pessimism surrounding the Mexican economy as it begins to suffer from its close economic relationship with the US. About 80 per cent of Mexico’s exports go directly to the US, and their value is equivalent to about 25 per cent of gross domestic product.

Inegi, the national statistics agency, added to the gloom with the news that manufacturing exports in December slumped by 11.5 per cent compared with the same month in 2007. In September, Inegi reported that these exports grew more than 12 per cent compared with a year previously.