A man buys toys at a street market in Mexico City in January 2022. Gladys Serrano
Mexico grew in 2022 despite an environment of uncertainty and inflation. The country’s economy grew 3.1% last year, slightly better than the 3% previously estimated by the National Institute of Statistics and Geography (INEGI). In data released this Friday, gross domestic product (GDP) rose 0.5% sequentially in the fourth quarter. The performance of economic activity in the country was driven by industrial activities, which registered growth of 3.3%, a level not seen since 2010, mainly from manufacturing.
Tertiary activities – where services are based and contribute most to GDP – grew by 2.8% in 2022, better than the originally estimated 2.7%. While agricultural work recorded a growth of 2.6%.
Inflation has been one of the biggest challenges facing the Latin American country since last year. The consumer price index is currently at 7.76% for the first two weeks of February, providing a slight breather after the recovery seen in the previous two weeks. However, the sharpest rise in prices in the past two decades has prompted Mexico’s central bank to raise interest rates to unprecedented levels in a bid to curb inflation. Currently, this reference rate is already 11%.
Rodolfo de la Torre, director of social development with equity at Centro de Estudios Espinosa Yglesias, calls this upward adjustment to early 2022 forecasts a “moderate but positive surprise”. The economist explains this increase with the post-pandemic recovery. “It should be emphasized that a large part of the people are returning to the labor market. During the pandemic, much of the population, mostly women, has withdrawn from the labor market and has gradually returned, boosting the economy. We have more available labor in some markets and greater demand for our products,” he says.
Coincidentally, Banco Base’s Director of Analysis, Gabriela Siller, specifies that the revision of GDP makes it clear that Mexico’s economic growth in 2022 was driven by the secondary sector, mainly manufacturing, where Mexico’s exports are based. The expert points out that it is still premature to attribute the national economic growth to the so-called nearshoring industrial relocation. “This kind of relocation of industrial activities is a gradual process, we could see some of it in 2023, but I think it will be more crucial in 2024,” says the specialist.
Mexico’s economy outperformed its northern neighbor. The gross domestic product (GDP) of the United States grew at an annualized rate of 2.9% in 2022. The rise in interest rates in this country has slowed some sectors (construction and home buying) but has not yet caused the dreaded recession.
Mexico’s economic growth in 2022 even exceeded World Bank forecasts. The international organization estimated the performance of Mexico’s GDP at 2.6%. For this year, however, the multilaterals are forecasting growth of just under 0.9%, while in 2024 they will rise again to 2.3%.
For this year, De la Torre warns of a possible risk of a future slowdown in the US economy, on which the performance of national exports largely depends. The expert from the Espinosa Yglesias study center sees inflation in Mexico, which has not yet been tamed, and the lack of legal security to attract more investments as a further risk. “Investment is still relatively low, workers are coming, but not to new plants, but to already installed factories,” he concludes. For now, the region’s second-largest economy has put on a modest but positive performance.
Subscribe here to the EL PAÍS México newsletter and receive all the important information about current events in this country