Mexico 3rd-Quarter Growth Likely 1.7%, Ministry Says

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Mexico's economic growth probably slowed to 1.7 percent in the third quarter as the global credit crisis weakened the manufacturing and construction industries, the Finance Ministry said.

The economy grew 2.8 percent in the second quarter, and the government forecasts growth of 2 percent for all of 2008, the ministry said in a report. Mexico had a budget surplus of 13.9 billion pesos ($1.09 billion) in September and a 139.9 billion- peso surplus in the first three quarters of 2008, the e-mailed report said.

Mexico wasn't as affected as other countries by the global crisis because job growth and public spending continued and President Felipe Calderon's countercyclical policies helped shore up the economy, the report said. The country has also benefited from the fact that its banks didn't invest in the U.S. subprime mortgage market, the report added.

``Productive activity on a global level has started to show signs of greater weakness,'' the report said. ``In Mexico, the negative impact of this situation on the real variables of the economy has been limited.''

Still, Citigroup Inc. said in a report today that a worst- case scenario of prolonged weak global growth and lower commodity prices would cause Mexico's economy to shrink 0.2 percent next year.

`Trigger a Recession'

``A turn for the worse in the global economy would trigger a recession in Mexico,'' the report said.

Industrial production fell 1 percent in July and August, while agricultural activity grew 0.3 percent during that period, the Finance Ministry's report said. Mexico will release its official third quarter growth report on Nov 21.

``We're still experiencing a very complex situation internationally,'' Finance Ministry Chief Economist Miguel Messmacher said in a news conference. ``President Felipe Calderon has instructed us to stay very alert and be ready to respond to any additional situations.''

The government forecasts the economy will grow 1.8 percent next year, while the central bank predicts the economy will expand 0.5 percent to 1.5 percent in 2009. Morgan Stanley forecasts no growth in 2009, while JPMorgan Chase & Co. sees growth at 0.3 percent for that period.

New Jobs

Mexico created 340,667 new formal jobs in the first three quarters of the year, the report said. Exports grew 12.1 percent in the third quarter from last year, while oil exports increased 32.3 percent during that period, it said.

Oil revenue grew 19.7 percent in the first three quarters on higher oil prices even as output fell and higher gasoline imports and a stronger exchange rate hurt revenue at the state oil monopoly.

Mexico's economy will avoid deteriorating as much as the U.S. economy in the fourth quarter and next year because of strong infrastructure spending, a smaller decline in oil output and growth in the service industries, said Alonso Cervera, a Latin America economist with Credit Suisse Group AG in New York.

``There are reasons why we should expect Mexico not to be hurt as much by the U.S. next year,'' said Cervera, who forecasts growth of 1.5 percent in 2009.

The government plans to maintain its spending and revenue projections for 2009 through the global credit crisis and the falling price of oil, Messmacher said at the news conference. The government will tap its stabilization fund if the price of oil falls further, he said.

Cesar Duarte Jaquez, head of the lower house of Congress, said yesterday that Mexican lawmakers may modify the revenue side of the 2009 budget as the global credit crisis slows the economy.

Congress approved the part of the budget dealing with federal revenue earlier this month. It assumed Mexico's oil exports -- which provide more than a third of the budget -- will average $70 a barrel next year.