MercoPress. South Atlantic News Agency

Mexican economy surprises and expands 4.8% in 2006

Mexico's economy, Latinamerica's largest expanded 4.8% in 2006 compared to 2005 and the highest in six years reported the Finance Secretary in an official release.

Industry's growth was 5%; services 4.9% and agriculture, forestry and fisheries, 4.8%. But these figures also have some surprises arising from the country's close trade links with the US. At the beginning of 2006 the Mexican Central Bank and the Finance Ministry were estimating 3.5% to 4.5% growth, after having reached 3% in 2005. For this year the Organization for Economic Cooperation and Development is forecasting a GDP expansion between 3.5% and 4.5%, an opinion shared by the Mexican private sector. However Mexico's economic growth weakened in the fourth quarter, slowing for a third straight quarter following a slump in US demand for exports. GDP in the fourth quarter grew 4.3%, down from 4.6% in the third quarter and 5.5% in the first. However agriculture, forestry and fisheries in the Q4 expanded 9.8%; services, 4.2% and industry, 3.6%. Some analysts fear a slowdown in Latin America's largest economy, which began in the first quarter in 2006, may deepen this year because of a drop in auto output and lower U.S. demand for Mexican manufactured goods. December industrial production, which rose 1.6%, the lowest level in eight months, underscores the deceleration. Auto output in December dropped 4.8% from a year ago to 129,543 automobiles and another 15% in January to 131,935 vehicles. Mexican export growth leveled off in the final two months of 2006, rising 4% in December and 6% in November after an average increase of 19% for the first ten months. Mexican exports last year reached 250 billion US dollars of which 79% was to the US. Crude production averaged 3.1 million barrels a day during the last three months of 2006, which is 6% lower than the 3.31 million barrels a day in the same year-earlier period, according to a report by government owned monopoly Petroleos Mexicanos. Pemex production will likely drop in 2007 as output at its largest oil field, Cantarell, is forecast to decline 12 percent, Chief Executive Officer Jesus Reyes Heroles admitted February 7. Oil is one of the country's main sources of foreign income and also helps to finance, very generously, the federal budget.