HR Ratings Lowers Growth Forecast for Mexico in 2024
The agency HR Ratings has downgraded its growth projection for Mexico for the year 2024 to 1.4%, a decrease of 0.6 percentage points compared to its previous estimate of 2%. This adjustment is due to negative revisions of economic growth for the first two quarters of the year made by Inegi, indicating that the economy grew at a slower pace than expected.
Furthermore, the expectation for 2025 has been reduced to 1.1% from 1.8%, due to cuts in public spending, the uncertainty generated by the change in administration, and the need to pass constitutional reforms. For this year, the revision also considers the volatility of the global environment, which could heighten trade tensions with the United States, our main trading partner. "This translates to lower demand for products due to trade barriers imposed on Asian companies operating in Mexico, especially in the manufacturing sector," the rating agency commented. An additional aspect mentioned is the weakness in job creation in the formal market compared to the previous two years. "According to our projections, in 2024, between 250,000 and 300,000 jobs could be created in the IMSS registry, which would be the lowest record since 2009, except for the pandemic period in 2020." A slight increase in the unemployment rate has also been observed, rising from 2.6% to 2.9% by the end of 2023 according to Inegi. On the other hand, the weakness in consumption is reflected in a reduction in credit granted through credit cards, payroll loans, and personal loans, which have shown deterioration since the end of 2023. "The drop in consumption levels was surprising, especially since social program payments were anticipated in February," it noted.
It is essential to closely monitor these indicators since weak growth and limited job creation can negatively impact the purchasing power of families and the overall economic health of the country. Fostering a favorable environment for investment and consumption will be key to reversing this trend and achieving sustainable growth.
