Mexico's economy grew a robust 5 percent in the third quarter vs. a year ago, according to government figures Wednesday, defying expectations of a slowdown amid recent international financial turmoil.
Fueled by strong consumption, the rate of growth easily beat expectations of 3.75 percent quarterly growth, as estimated by 13 Mexico City-based economists surveyed on the results by Reuters.''It's amazing. The Mexican economy has still got strong momentum, defying skeptics,'' said Damian Fraser, head of analysis at SBC Warburg Dillon Read in Mexico City.
''It's an impressive advance . . . It again shows an upbeat performance in the real economy and leads us to suppose the rest of 1998 will also be good,'' said Juan Pablo Chavez, an analyst at IDEA in New York.
Although the economy bounced back quickly from the painful 1994-95 peso crisis, which caused the deepest recession in 50 years, fresh trouble surfaced this year because of low international oil prices and Asia's and Russia's deepening economic crises.
Oil revenue makes up nearly a third of Mexican government income. Declining prices forced government officials into three separate rounds of painful spending cuts that seemed certain to trim growth.
Interest rates nearly doubled in August when the peso suffered an attack caused by currency speculation. Also, Asia's crisis began to infect Latin America, making new credit expensive right when Mexico's consumers appeared ready to dust off their credit cards from the 1994-95 peso crisis and begin taking on fresh debt.
Ironically, low levels of debt may have helped the economy withstand the hit from higher interest rates, economists said, when asked how the economy could emerge so robust.
''Why? Basically because employment is strong and there's not a lot of leverage in the Mexican economy so the high interest rates don't have that much of an immediate impact on consumption,'' Mr. Fraser said.
Manufacturing led the way with 6.9 percent growth, according to the Finance Ministry figures - evidence of strong exports and healthy consumer spending.
''What the figure reflects is that growth is still solid and the productive sector is somewhat insulated from external shocks on the exchange rate and internal shocks on interest rates,'' said Pedro Vanegas at the Mexican Center for Economic Forecasting (CAPEM).
Growth was also strong in services and other sectors including fisheries and agriculture. Agricultural output recovered after a tough first half of the year when drought and then flooding curtailed production, the ministry said.
Although higher interest rates will eventually force a slowdown, economists said the economy would only have to grow 2.6 percent in the final quarter to meet the government's target of 4.6 percent growth for the year as a whole.
The figure was welcome news for a government that wants healthy economic growth but not at the expense of fiscal discipline. The government this week proposed a tight-fisted 1999 budget with a fiscal deficit target of just 1.25 percent of gross domestic product.