Mexico’s GDP: resilience to international economic conditions

Mexico‘s GDP showed resilience to international economic conditions in 2023, according to an analysis by Intercam Banco.

In the global environment, the war between Gaza and Israel was added to an environment already fragmented by the conflict between Russia and Ukraine, where the former has begun to generate uncertainty and delays in international trade.

Additionally, during the year monetary policy became more restrictive and central banks gave no respite in their fight against inflation. 

«Despite the above, the global economy showed resilience and in particular the Mexican economy stood out for its acceleration, since, the most recent figures, and our estimates, reflect that the country grew 3.4% in 2023, after growing 3.9% in 2022, both figures above the potential growth of the economy at 2.0 percent,» said Intercam Banco.

At the beginning of 2023, the consensus estimate was for growth of just 1.0 percent.

Behind the vigorous growth rate of the economy in 2023 was a strong dynamism in domestic demand in the areas of private consumption and productive investment. 

With respect to the former, there was growth in salaries, job creation, a rebound in consumer confidence, remittances at historic highs, as well as a wage bill that grew considerably and consumer credit, which during the first ten months of the year grew at double-digit rates. 

Mexico’s GDP

For investment, the outgoing administration’s efforts to complete flagship projects boosted the construction of infrastructure works and also the purchase of private machinery and equipment as a prelude to nearshoring-related projects. 

Intercam Banco referred that in the United States the economy is estimated to grow 2.4% in 2023, after growing 1.9% in 2022, leaving far behind the recession scenario that was estimated at the beginning. 

Outlook

With respect to external demand, a slowdown in the U.S. economy is expected in 2024; for example, the Bloomberg consensus estimates GDP growth of only 1.3 percent. 

External demand has continued to grow at the margin, but progress is increasingly modest. 

In 2024 exports will continue to grow, albeit moderately, and the main driver of the Mexican economy will be domestic demand, as was the case in 2023. 

Intercam Banco expects a particularly positive start, as the US economy will show inertial growth, but we should not rule out signs of exhaustion in the second half of 2024, as the effects of the restrictive monetary policy should begin to materialize.

For domestic demand, the 20% increase in the minimum wage, the fiscal impulse programmed in the 2024 economic package, as well as the advances in social programs in the first quarter of the year will continue to contribute positively to consumption.