MEXICO CITY (CNN) -- Mexico's stock market and its currency, the peso, have taken a battering this week -- a sign that international investors are becoming increasingly nervous about operating in emerging markets, because of recent volatility in Asia.

Mexican stocks have lost about a third of their value since the year began. Heavy losses on the stock market Tuesday triggered a quick and dramatic drop in the value of the peso, which was trading at an average of 9.2 pesos to the U.S. dollar.

Economists are predicting that the financial convulsions in Asia will substantially slow economic growth in Mexico this year.

"Truly, without the Asia crisis, Mexico would have grown faster, at about 6 percent. But because of Asia, it will be more modest -- between 4.0 and 4.5 percent," said Jorge Mariscal, chief strategist for Latin America at Goldman Sachs in New York.

The chief difficulty Mexico faces because of the Asian crisis is a collapse in Asia's demand for oil, which has pushed down its price. Asia normally absorbs 30 percent of global production.

In the first half of the year, Mexican crude oil export revenues dropped $1.7 billion, compared to the same period of 1997.

Headlines in Mexico reflect the peso's devaluation

Though oil represents only about 10 percent of Mexico's exports, it accounts for more than one-third of government revenues. The income loss already has forced three rounds of budget cuts, which have impacted government-stimulated areas of growth.

And as the value of Asian currencies drops, products from China and Japan become cheaper than Mexican goods, which could be an additional threat for Mexican companies.

While the Asian crisis has clearly played a role, some investors who have grown wary of Mexican markets say home-grown factors have also influenced their newfound sense of caution -- including a brewing public controversy over using taxpayer money to bail out the country's troubled banking system.

However, some economists believe that the effects of Mexico's recent downturn will be ameliorated by its membership in the North American Free Trade Agreement, or NAFTA, which links Mexico's economy with the larger economies of the United States and Canada.

They predict that any threat to U.S. manufacturing from Asia will force U.S. firms to improve competitiveness, bringing investment and efficiency improvements to Mexico's wide belt of maquiladora (assembly plant) factories.

Mexico City Bureau Chief Harris Whitbeck and Reuters contributed to this report.