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Mexico’s Gross Domestic Product (YoY) registered at 3.7% in the first quarter of 2019, below expectations of 3.9%.
The economic growth rate is Mexico’s lowest in four years, and its slowest rate since a contraction in the fourth quarter of 2015. This is a major disappointment for the Mexican economy, in a time when they are expected to be achieving higher growth rates.
Mexico’s economic growth has been hindered by lagging investment, weak domestic consumption and a deteriorating trade balance. Investment has remained weak due to uncertainty over fiscal and monetary policies. The Trump administration’s announcement of a tariff on steel and aluminum exports from Mexico has also adversely affected the economy.
Domestic consumption has also been weak due to higher inflation and weak wage growth, while the government’s public spending program has yet to have a significant impact. Furthermore, falling oil prices have affected Mexico’s trade balance, as the country is a major exporter of oil.
The government has responded to the weak economic growth by introducing a series of economic reforms, such as loosening labor regulations and raising the minimum wage. The Bank of Mexico has also reduced interest rates to stimulae lending and promote economic activity.
Despite these measures, it appears that the Mexican economy will remain weak in the near-term. The government will need to implement further fiscal and monetary stimulus if they are to achieve the desired growth rate of between 2-3% for 2019.
