Mexico’s economy is predicted to contract

The Mexican economy will contract between 0.8% and 1.8% in 2009, the central bank predicted Tuesday.

Mexico sends 80% of its exports to the United States, and it has been pummeled by the U.S. recession. The bank estimates that Mexico will lose as many as 340,000 jobs this year.

The bank’s forecast is in contrast with the government’s prediction of zero growth, which central bank President Guillermo Ortiz has called optimistic.

He said Tuesday that he expected the economy to shrink between 0.8% and 1.8% this year.

“Normally when we give these GDP forecasts we give a range of half a percent, but this time the range is 1% because of the enormous degree of uncertainty,” Ortiz told reporters.

The bank said in its 2008 inflation report that the Mexican economy’s downturn was more acute in the last quarter of 2008, and since then the risks of lower growth had increased significantly.

Mexican Treasury Secretary Agustin Carstens said he expected the economy to contract during the first half of the year, indicating that the country was heading into a recession. But he said growth should pick up in the second half and 2009 should end with zero growth.

The bank said the economy probably contracted 1% in the last quarter of 2008. It expects economic growth for 2008 as a whole to be 1.5%, although official figures will not be available until Feb. 20. The bank earlier had forecast 2% growth for 2008.

President Felipe Calderon this month introduced a $150-million economic stimulus package to prevent layoffs. His administration also slashed energy costs to curb Mexico’s stubbornly high inflation, which reached a seven-year high of 6.5% in 2008.