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Mexico’s economy grows 0.9% in the third quarter but tighter conditions are expected

Nov 25 (Reuters) – Mexico’s economy grew 0.9% in the third quarter from the previous three-month period, national statistics agency INEGI said on Friday, mainly driven by the primary sector and despite an ongoing aggressive monetary tightening cycle.

Quarterly growth, Mexico’s third straight, was slightly below economists’ expectations, which came in at 1.0% in a Reuters poll — the same level as preliminary INEGI data showed late last month.

Latin America’s second-largest economy repeated a trend from the previous quarter and posted overall growth over the period, with primary, secondary and tertiary sectors up 2%, 0.6% and 1.1%, respectively.

The economic expansion comes as the Bank of Mexico pursues an aggressive tightening cycle to stem stubbornly high inflation, which has pushed interest rates to a record 10% this year.

However, tighter monetary conditions are expected to slow Mexico’s GDP growth, and President Andres Manuel Lopez Obrador recently urged the central bank to balance fighting inflation with the need to protect economic growth.

“The economy has remained resilient so far this year, which will give Banxico enough ammunition to continue tightening in the short term,” said Andres Abadia, chief economist for Latin America at Pantheon Macroeconomics.

“But the risks to the Mexican economy in 2023 remain massively on the downside.”

Fitch Ratings said this month that Mexico’s gross domestic product will grow 2.5% in real terms in 2022 and 1.4% next year, while the International Monetary Fund (IMF) projects growth of 2.1% this year and 1.2% forecast in 2023.

On a yearly basis, INEGI said the country’s economy grew 4.3% year on year in the third quarter, beating expectations of 4.1% growth by economists polled by Reuters.

In a regular news conference on Friday, Mexican President Andres Manuel Lopez Obrador said he expects national GDP growth to hit 3% this year, as well as in 2023 and 2024.

Separately, data on Friday showed that Mexico’s economic activity in September grew 0.7% from August and 5.2% from September 2021, both also above market forecasts.

Reporting by Gabriel Araujo; Additional reporting by Aida Pelaez-Fernandez; Edited by Steven Grattan, Christina Fincher and Josie Kao

Our standards: The Thomson Reuters Trust Principles.

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