Introduction
Goldman Sachs, a global investment banking firm, has revised its Mexican GDP growth forecast for this year. The bank now anticipates zero growth, compared to the previous prediction of a 0.5% contraction in April.
US Economic Performance as a Growth Driver
The updated forecast takes into account the positive impact of a more dynamic US economy, Mexico’s primary trading partner. Goldman Sachs analysts believe that recent agreements between the US, China, and the UK have reduced the probability of a US recession from 45% to 35%
Integration of Mexican and US Economies
According to Alberto Ramos, Goldman Sachs’ chief economist for Latin America, the upward revision in their forecast reflects not only a stronger US growth but also a more robust real activity than initially expected in the first quarter. This is supported by Mexico’s timely GDP estimate released by INEGI.
Challenges Ahead
Despite the revised outlook, Ramos warns that 2025 will remain challenging for growth. US tariffs on Mexico have not been reduced yet, and there’s uncertainty surrounding the upcoming T-MEC review.
Potential Rate Cuts in the US
The improved economic outlook for the US encourages the possibility of the Federal Open Market Committee (FOMC) continuing its cycle of rate cuts, which was paused in January.
- Question: Goldman Sachs maintains its 1.3% growth prediction for the US economy.
- Question: These agreements have reduced the likelihood of a US recession and positively impacted Mexico’s growth prospects.
- Question: Lower tariffs are expected to have a less disruptive effect on domestic activity, labor markets, and inflation in the US.
- Question: They suggest that temporary tariff reductions between the US and China could stabilize growth conditions and reduce global recession risks.
Conclusion
While there is optimism regarding Mexico’s economic growth, analysts caution that it remains too early for significant upward revisions in global growth outlooks.
