UPDATE 2-Mexico economy misses growth forecast in Q4, slows from 2016

(Adds analyst commentary) MEXICO CITY, Feb 23 (Reuters) - Mexico's economy grew at a more tepid pace than projected in the fourth quarter to cap last year's growth at 2 percent, slowing amid inflation, political uncertainty and declining oil production. Gross domestic product in Latin America's second-biggest economy expanded 0.8 percent in the fourth quarter from the previous three-month period, the national statistics agency said on Friday. Preliminary data last month had estimated growth of 1 percent. "It's a big miss," said Benito Berber, an analyst at Nomura Securities in New York, referring to the quarterly figures. "The Mexican economy seems to be slowing down." The economy grew 0.7 percent in December from the previous month, slightly slower than November's pace, and signaling potential weakness that could leech into 2018, a separate report from the statistics agency showed. Mexico's economy has grown at sluggish rates during the administration of President Enrique Pena Nieto, who had promised to supercharge growth through key economic reforms, with the 2013-14 opening of the state-dominated oil industry. Oil was the hardest hit sector of Mexico's economy last year, shrinking more than 10 percent compared to 2016. In the fourth-quarter data, the industrial sector overall weakened 0.1 percent, while services expanded 1 percent and agriculture grew 2.1 percent. The government has forecast that as a result of its reforms, some of the world's largest oil companies will ultimately invest about $150 billion in Mexico if they succeed in extraction efforts, though growth may be several years away. Andres Manuel Lopez Obrador, the presidential front-runner ahead of Mexico's July 1 elections, would make dramatic changes to energy strategy to boost productivity, his campaign said on Wednesday. In the fourth quarter, the economy grew 1.5 percent from the same quarter the previous year, slower than a preliminary rate of 1.8 percent. The economy expanded 2 percent in full-year 2017 compared with the year before. That expansion was slower than 2016's 2.9 percent growth, but held up despite inflation, declining oil production and uncertainty around presidential elections as well as the renegotiation of the North American Free Trade Agreement, Goldman Sachs analyst Alberto Ramos said in a report. He anticipated, however, that private consumption will be dragged down in the coming months due to quickening inflation that has pushed the central bank to hike interest rates to the highest in nine years. "Activity proved more resilient than expected ... but there are now a number of signs that the forward momentum may be softening," Ramos wrote.

(Reporting by Daina Beth Solomon and Michael O'Boyle; editing