×

UPDATE 2-Mexico raises 2017 growth estimate as Trump fears fade

(Recasts; adds revised growth estimate, quote)

MEXICO CITY, May 22 (Reuters) - Mexico on Monday revised upward its official 2017 growth estimate, shortly after government data showed the economy was largely shrugging off fears U.S. President Donald Trump's policies would wreak havoc on Mexican exports and investment.

The Mexican Finance Ministry said in a statement it was raising its 2017 growth estimate to 1.5 percent-2.5 percent, slightly above its previous range of 1.3 percent-2.3 percent.

That came after seasonally adjusted data released by national statistics agency INEGI showed the country's gross domestic product (GDP) grew at a rate of 0.7 percent in the first three months of 2017, the same pace as in the fourth quarter.

Mexico's GDP expanded 2.8 percent compared with the first quarter of 2016.

The election of Donald Trump last year raised the specter of recession in Mexico as he threatened to shred the North American Free Trade Agreement (NAFTA) and pursue U.S. policies that could hurt the Mexican economy. That sent the country's peso into a tailspin and prompted some economists to lower growth forecasts.

Nonetheless, the slow progress in starting talks on NAFTA and an overall softening of rhetoric about U.S. companies that invest in Mexico have calmed nerves for now.

The upwardly revised growth estimate is seen as good news for Mexican President Enrique Pena Nieto's administration just before important regional elections that serve as a curtain-raiser for a hotly contested presidential vote in 2018.

But Mexico's presidential race and ongoing doubts surrounding Trump's future policies are likely to weigh on spending by both international and domestic firms, according to Alberto Ramos, co-head of Latin America Economic Research team at Goldman Sachs.

"Uncertainty with regard to the outcome of the presidential election next year and the U.S. post-election policy mix is likely to continue to have a negative impact on activity by rendering domestic economic agents more defensive," he wrote.

"Important investment decisions may be postponed, scaled down or even canceled," Ramos added.

Growth was higher than preliminary figures released last month, which projected quarter-on-quarter growth of 0.6 percent. The preliminary data showed the economy growing at an annual rate of 2.7 percent for the quarter.

Monday's data showed Mexico's agricultural sector expanded 1.1 percent in the first quarter, compared with growth of 0.6 percent in the fourth quarter, while the services sector expanded 1 percent from 0.9 percent in the previous three-month period. (Reporting by Mexico City newsroom; editing by Chizu Nomiyama, G Crosse)