The Mexican economy grew 3.2% in annual terms in 2023, according to revised data published by the national statistics agency INEGI on Thursday.
The figure is slightly below the 3.3% GDP expansion reported in mid-January based on preliminary data. The 3.2% growth comes after expansions of 3.1% in 2022 and 5% in 2021.
The strong growth in 2021 came after an 8.5% contraction in 2020 as the COVID-19 pandemic and associated restrictions ravaged the economy.
Last year, Mexico’s secondary or manufacturing industry recorded the strongest growth among the three broad sectors of the economy, expanding 3.5% compared to 2022.
GDP for the tertiary or services sector increased 3.1%, while that for the primary sector including agriculture, logging and fishing expanded 2.1%.
The overall growth figure was well above forecasts made in early 2023, but slightly below some more recent ones. The International Monetary Fund (IMF), for example, predicted in January that final data would show that the Mexican economy grew 3.4% last year.
The IMF said late last year that Mexico had overtaken South Korea and Australia to become the 12th largest economy in the world.
At 2.5%, annual growth in the final quarter of 2023 was below the figure for the entire year. Andrés Abadia, chief Latin America economist at Pantheon Macroeconomics, believes it’s “probable that growth will continue to be weak in the short term due to stricter financial conditions and less favorable remittances from abroad.”
The Bank of Mexico’s benchmark interest rate remains at an all-time high 11.25% almost a year after it was raised to that level, while remittances could fall from the record level recorded in 2023 depending on economic conditions in the United States.
An initial cut to the key interest rate is expected some time in the first half of this year, provided inflation continues to fall.
Annual headline inflation declined in the first half of February after increasing during three consecutive months between November and January, but at 4.45% remains above the central bank’s target.
Abadia said that Mexico’s strong labor market will help avoid a “prolonged downward trend” in economic growth rates. However, he noted that activity in the construction sector — a key driver of growth last year — has begun to slow as the government nears completion of some major infrastructure projects, such as the Maya Train railroad.
The El Financiero newspaper reported that the “market consensus” is that the Mexican economy will grow 2.4% this year, but noted that predictions could change if an interest rate cut — or even successive cuts — spurs private consumption.
Meanwhile, the growing nearshoring trend is expected to once again benefit the economy in 2024 as foreign companies act on investment announcements they have already made.
Foreign firms announced investment plans totaling over US $106 billion in the first 11 months of 2023, according to the Economy Ministry (SE), which expects the money to flow into the country in coming years. That figure is almost triple Mexico’s foreign direct investment total in 2023, according to preliminary data published last week.
With reports from El Financiero and El Economista
