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Slower growth forecast in Mexico

January 31, 2008|From Reuters

MEXICO CITY — Mexico slashed its economic growth forecast for 2008 on Wednesday as a possible recession loomed in the United States, its top trading partner.

The Finance Ministry said it now expected the economy to expand just 2.8% this year, compared with its previous forecast of 3.7% growth.

The new forecast comes amid turmoil in the U.S. housing and credit markets. A report Wednesday showed that the U.S. economy grew 2.2% in 2007, its lowest rate in five years.

Mexico's central bank also cut its growth estimate sharply while maintaining its forecast for a spike in inflation later this year, a situation it said had made interest rate decisions more difficult.

The central bank lowered its economic growth forecast for 2008 to between 2.75% and 3.25% from between 3.25% and 3.75% previously.

Slow U.S. growth is bad news for the economy in Mexico, which sends about 80% of its exports to its northern neighbor.

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