State of the Mexican Economy Despite Tariffs

Mexico is not at risk of falling into recession despite the possible tariffs that the United States has in mind, said Everardo Elizondo, former deputy governor of the Bank of Mexico (Banxico), on Monday. "The situation remains positive; a recession is something much more severe," he remarked after speaking at the conference "Economic and Political Outlook for Mexico 2025," organized by EGADE.

Elizondo emphasized that there is a movement emerging towards the recovery of economic sovereignty, but he cautioned that this tendency could harm the economy. "Economic isolation is a very bad idea because it prevents resources from being used efficiently," he mentioned during his talk. He also pointed out that Mexico is facing three challenges: slow economic growth, insufficient control of inflation, and pressures coming from the United States. Regarding GDP growth, Elizondo hopes that "with a bit of luck," they can avoid a zero growth rate. On the topic of inflation, he described it as premature for Banxico to begin cutting the reference rate before clear signs of deceleration appeared. "It's evident that they will continue to lower the rate," he declared. "The decision to reduce it initially seemed premature to me. We are far from reaching the target." In his view, one indication that the market is not feeling a restrictive stance from the central bank is the placement of credit; as of November 2024, consumer credit has grown by 12.8%, while corporate credit has increased by 8.4%, figures that vastly exceed GDP growth.

In the current context, it's crucial for policymakers to consider measures that promote a balance between growth and inflation containment, as an excess of credit in the economy could jeopardize long-term economic stability. It’s vital to be cautious and dynamic in responding to market conditions and foreign policies to maintain the economic health of Mexico.