The Bank of Mexico (Banxico) cut its growth forecast for Mexico’s economy in 2023.
In its quarterly report covering April-June 2022, Banxico estimated that the Gross Domestic Product (GDP) will advance between a range of 0.8 and 2.4 percent, with a central scenario of 1.6 percent.
This represents a cut from the previous report, which forecast an advance of 1.4 to 3.4 percent, with a central scenario of 2.4 percent.
Main economic forecasts released in the #InformeTrimestralBanxico (April-June 2022) #BancodeMéxico pic.twitter.com/jc56jmXpkD
— Bank of Mexico (@Banxico) August 31, 2022
The institution explained that in order to make these adjustments it took into account inflation, the effects of the pandemic and the conflict between Russia and Ukraine.
“The outlook for global economic activity has deteriorated in the face of high levels of inflation, more astringent financial conditions, and various trade and geopolitical tensions. In particular, slower growth is expected in the U.S. economy and its industrial activity. In this complex context, the forecasts presented incorporate into the forecast horizon the expected effects on the Mexican economy of lower external demand than previously anticipated,” the report reads.
For this year, expectations remain at 2.2%.
Another factor to consider is the tensions between Mexico, Canada and the United States over the USMCA issue.
“The process of resolving the disputes raised by the United States and Canada against Mexico under the USMCA introduces a new factor of uncertainty and risk that could affect investment decisions in the country.”
Regarding jobs; a casualty is also expected. By 2023, a variation of between 420 and 620 thousand jobs is estimated. The previous report predicted between 490 and 690,000 jobs.
Inflation at the highest levels
On the issue of inflation, Banxico considered that Mexico and the world will face an “extremely complex” environment due to two factors: war and the pandemic.
“In this way, inflation in many countries and in Mexico has reached levels not seen in decades.”
Banxico explained that the context of pressures on production costs, disruptions in production and distribution chains and high global demand prevails.
“Thus, the inflation of goods, particularly that of food, and that of services has been higher than expected.”
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