The Mexican economy is expected to start the year with an expansion of only 0.1%

Economic activity in Mexico would start 2024 on the wrong foot, as it would show a monthly contraction according to data released by Inegi (National Institute of Statistics).

With a specific estimate of just 0.1 percent, Mexico’s growth has stalled a little bit, but currently is the star of LATAM.

Economic activity in Mexico could begin the year with a contraction ranging from 0.7 to a growth of 1.0%, according to estimates from the National Institute of Statistics. The most likely scenario is the expansion of 0.1%.

The Timely Indicator of Economic Activity (IOAE), which aims to track the economy on a monthly basis, yielded these two limits. With this data, economic activity in Mexico would report its first growth after three consecutive contractions seen in the last quarter of the previous year.

In year-on-year comparison, the economy would have shown a growth of 2.2% at the beginning of the year. For 2024, estimates suggest that the economy will grow less than the approximately 3% observed in 2023. While forecasts from institutions indicate a growth rate around 2%, the government of President Andrés Manuel López Obrador expects a rate between 2.5 and 3.5%.

The so-called “nearshoring” of a significant portion of the American and Canadian industries explains why there is a high demand for Mexican industry, employment, and services.

Nearshoring refers to the practice of transferring business operations, such as manufacturing or service centers, to a nearby country rather than a distant one.

It is often done to take advantage of lower costs, reduce logistical dependence, and avoid the dependency of countries with different values.

The United States’ objective is to reduce dependence on China, in what is called the “decoupling” of its economy. The increasing tensions surrounding Taiwan, trade barriers, and China’s growing influence in the world have given the United States enough reasons to rethink how its economy distributes its supply chains.

Nearshoring for the USA involves the relocation operations to Mexico or other countries in Central or South America. This trend is also expected to reach countries like Argentina, Brazil, and Colombia.

Mexico is undoubtedly the most benefited country. The demand for its industry in health, auto parts, and other critical supplies is leading to significant economic growth. Mexico has experienced a growth of 3.2% during 2023, and a similar figure is expected in 2024.

ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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The Mexican economy is expected to start the year with an expansion of only 0.1%

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The Mexican economy is expected to start the year with an expansion of only 0.1%

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