(Adds byline, potential hit to peso in 2024 in paragraphs 6-9)

By Noe Torres

MEXICO CITY, Dec 29 (Reuters) - The Mexican peso closed on Friday to end its strongest year against the U.S. dollar in more than three decades, although analysts warned its gains could slow in 2024 as the central bank is expected to lower record-high borrowing costs.

The currency, which President Andres Manuel Lopez Obrador and others call the "super peso," closed at 16.95 units to the dollar with an cumulative gain of almost 13% in 2023, its strongest annual performance since 1989, when data is first available on LSEG.

"The peso's appreciation this year was something unusual, something that no one could have predicted," Jonathan Heath, deputy governor at the Bank of Mexico, wrote on social media on Friday.

The peso's surge made it one of the world's top performing currencies, second only to the Colombian peso, triggering warnings over how this could hurt competitiveness of Mexican exports and the purchasing power of remittances - two pillars of the Mexican economy.

The peso's appreciation, closing on Friday even below the psychological barrier of 17 pesos per greenback, has been attributed to capital inflows from abroad as well as restrictive monetary policy pursued by the central bank since June 2021 aimed at tackling creeping post-pandemic inflation.

Banxico, as Mexico's central bank is known, has since March held its benchmark interest rate at a record-high 11.25%, but is expected to begin cutting rates in the first quarter of 2024.

Analysts argue such cuts could cause the value of the peso to weaken to above 18 pesos per dollar.

Also potentially impacting the peso next year are presidential elections in Mexico and the U.S., which should inject volatility into the peso's outlook, said Humberto Calzada, chief economist at Rankia Latinoamerica.

"Still, we believe that 18 (per dollar) is an acceptable level for the exchange rate," he added. (Reporting by Noe Torres; Editing by David Alire Garcia and David Gregorio)