February 3, 2009 / 4:05 PM / 10 years ago

UPDATE 2-Mexico economy to shrink in 2009-cenbank poll

(Adds detail on growth expectations, legislation)

MEXICO CITY, Feb 3 (Reuters) - Mexico’s economy will likely shrink by 1.16 percent this year as the recession in the United States saps growth in its southern neighbor, according to analysts in a central bank poll released on Tuesday.

In the central bank’s previous poll, conducted in December, analysts predicted the economy would contract by 0.1 percent in 2009.

Economists have slashed their growth forecasts for Mexico as the U.S. downturn undermines demand for Mexico’s exports.

Mexico sends around 80 percent of its exports to the United States, which is reeling from what U.S. President Barack Obama calls the worst economic crisis since the Great Depression.

Mexico’s government may cut its forecast for the economy this year to a drop of as much as 1 percent, from its current forecast of 0 percent growth, finance ministry chief economist Miguel Messmacher told reporters on Tuesday.

Mexican lawmakers are planning an initiative to cut red tape and speed up budgeted spending on public works projects to help counter the effects of the economic slump.

Mexico’s central bank said last week that the Mexican economy could contract by as much as 1.8 percent this year.

Policy-makers lowered borrowing costs for the first time in nearly three years in January and are expected to aggressively cut key interest rate this year to help the economy.

Analysts in the latest poll predicted 2009 headline inflation at 4.12 percent, down from expectations of 4.56 percent in the previous poll. (Reporting by Michael O’Boyle, Editing by Chizu Nomiyama)

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