Mexico's president counters IMF forecast of economic contraction

By Ana Isabel Martinez and Natalia Siniawski

MEXICO CITY, April 22 (Reuters) - Mexican President Claudia Sheinbaum on Tuesday pushed back against the International Monetary Fund's new forecast of a contraction in GDP this year, saying public spending would help shield Latin America's no. 2 economy from market headwinds.

Earlier on Tuesday, the fund's updated World Economic Outlook forecast a 0.3% contraction in economic growth for 2025, down from the fund's January forecast of a 1.4% expansion, as U.S. tariffs bite into exports.

GDP, or gross domestic product, is the total monetary value of all goods and services produced within a country.

The IMF's downward revision accounted for most of the organization's estimate for a slowdown in Latin America and the Caribbean's GDP growth this year.

"We do not know what it is based on. We do not agree ... We have our economic models, which the finance ministry has, that do not coincide with this projection," Sheinbaum said during her regular morning press conference.

The IMF said its downgrade for Mexico reflected "weaker-than-expected activity in late 2024 and early 2025 as well as the impact of tariffs imposed by the United States, the associated uncertainty and geopolitical tensions, and a tightening of financing conditions."

Sheinbaum on Tuesday said that public investment would prevent the economy from contracting and touted her government's "Plan Mexico," an effort to boost domestic industry amid tariffs imposed by U.S. President Donald Trump on some imports from Mexico.

"(International financial organizations) do not believe governments can do anything to change a situation that comes from the market itself, and we do not share this vision ... we have a plan to strengthen the Mexican economy," Sheinbaum said.

Earlier this month, a draft budget from the Mexican finance ministry showed that the government sees the economy growing between 1.5% and 2.3% this year.

That estimate, which the government called conservative at the time, was greater than forecasts from Mexico's central bank and private sector analysts.

Mexico's economy, shaken in recent months by cooling investor confidence, the U.S. tariff threats, and a prolonged drought, is on the verge of falling into a technical recession after it contracted in the fourth quarter of 2024 and in January.

A preliminary estimate published earlier on Tuesday by Mexico's statistics agency showed the economy likely contracted 0.2% in March from the same month a year earlier, following a preliminary estimate that it shrank 0.7% in February.