The article highlights the Mexican economy retracting 0.3% after a three month period. This comes after two months of growth in Mexico’s GDP. This was likely caused by an industrial slowdown which was the result of a 1.5% decrease in manufacturing activities. While the industrial sector is down, the primary sector (fishing, farming and mining), was up 3.2%. Due to this economic decline and a generally stagnant economy, Mexico is likely to decrease its policy rates to stimulate the economy. Some economists forecast a 1.5% increase in the GDP for 2026 but say many factors make this estimate uncertain.
Considering that since the pandemic there have already been immense policy rate cuts since the COVID pandemic, it is likely that the trend of cutting rates will continue to prevent the economy from dipping further. Since the Mexican economy has had an extremely weak rebound from the initial decline in 2020, it would be unsurprising if this move would not have a lasting impact on the economy and would only stabilize it for a few years.
The two major players are the Mexican government and industry leaders in Mexico. The Mexican government is likely to reduce rates just enough to stabilize the economy while staying within a certain amount as to not cause excess inflation. Mexico’s industry leaders are likely to push for tax reductions on goods to help the low domestic consumption and would also take advantage of the reduced policy rates to take out loans and expand.
This article connects to Development and Sustainability because Mexico needs to stabilize its economy or face even less domestic consumption which would lead to more reductions in manufacturing, lower the GDP even more. Mexico’s lack of development has caused this stagnant economy which is a continuing trend among many of its Central American neighbors like Guatemala and El Salvador.