The Mexican economy contracted on a sequential basis for the first time in more than three years in the final quarter of 2024, according to preliminary data from national statistics agency INEGI.

Mexico’s GDP shrank 0.6% in the October-December quarter compared to the previous three-month period, INEGI reported on Thursday.

The quarter-over-quarter contraction was the first since the July-September quarter of 2021, and larger than the 0.2% economic decline forecast by economists surveyed by Reuters.

INEGI’s data showed that Mexico’s primary sector (agriculture, fishing and mining) contracted 8.9% between October and December compared to the previous quarter. The secondary or manufacturing sector also contracted, declining 1.2% compared to Q3, while the tertiary or services sector grew 0.2% on a sequential basis.

Gabriela Siller, director of economic analysis at Mexican bank Banco Base, said on X that the 0.6% quarter-over-quarter contraction “places Mexico on the verge of a recession.”

Andrés Abadía, chief Latin America economist at Pantheon Macroeconomics, described the latest economic data as “terrible,” saying that it was “consistent with the overall story of slowing growth as the effect of tighter financial conditions hits harder and external conditions become less friendly.”

The new Mexican government led by President Claudia Sheinbaum was in office for the entire final quarter of 2024, having taken office on Oct. 1.

Annual growth in 2024 was well below 2% 

INEGI’s data showed that the Mexican economy grew 0.6% on an annual basis in the final quarter of 2024, the slowest pace of annual growth since the first quarter of 2021 and well below the 1.2% consensus forecast of economists polled by Reuters.

Annual growth for 2024 as a whole was 1.5% in real terms and 1.3% in seasonally adjusted terms, INEGI said.

Growth slowed significantly compared to the annual rate of 3.2% in 2023. Mexico’s annual GDP expansion in 2024 was also well below the 2.8% growth rate of the United States economy.

In real terms, the primary sector contracted 2.5% annually in 2024, while the secondary and tertiary sectors grew 0.3% and 2.3%, respectively.

Mexico’s economic growth is forecast to be weak in 2025 as well. The World Bank sees the Mexican economy growing by 1.5% in 2025, while some other organizations and analysts are forecasting an even weaker expansion this year.

Other need-to-know economic data 

• The Mexican peso was trading at 20.71 to the US dollar at 3:30 p.m. Mexico City time.
• The Bank of Mexico’s benchmark interest rate is currently set at 10% after five cuts in 2024. The central bank’s board will hold its next monetary policy meeting on Feb. 6 and is widely expected to vote in favor of an additional cut, especially given the weak GDP data and an improving inflationary situation.
• Mexico’s annual headline inflation rate was 3.69% in the first half of January, its lowest level in almost four years.
• The value of Mexico’s exports hit a record high in 2024, increasing 4.1% annually to more than US $617 billion.

With reports from El Economista and Reuters