The International Monetary Fund (IMF) predicted this Friday that Mexico’s economic growth will decrease in the coming quarters despite the good performance it had in the first half of 2022.
In the 2022 Article IV Mission Final Staff Statement, the international body noted that Mexico is well positioned to “navigate” a potentially turbulent environment; nevertheless, the effects of the covid-19 pandemic and the global environment “could aggravate long-standing problems of low growth and high inequality”.
Mexico, like many countries in the world, is facing a rise in inflation due to the pandemic, and exacerbated by Russia’s invasion of Ukraine and a rise in fuel prices.
The IMF forecast that inflation will stabilize in the second half of the year and then gradually decline as higher prices of raw food and other cost drivers continue to influence prices.
This statement comes after this Friday the National Institute of Statistics and Geography (Inegi) highlighted that inflation is at its highest level in more than two decades and in September the National Consumer Price Index (INPC) stood at 8.70% at the interannual rate, without changes compared to August, but which anticipates a new tightening of the monetary policy of the Bank of Mexico (Banxico).
Banxico raised the key interest rate to 9.25%highlighting that strong pressures on prices still persist and delayed its estimated date of convergence to the 3% inflation target to the third quarter of 2024.
“Returning to low and stable inflation will likely require some further increases in the policy rate by the end of the year and keeping it there for some time,” the IMF said.
He noted that monetary policy tightening, coupled with some further increases broadly consistent with market expectations and incoming data, should lead to a decline in inflation.
However, he stated that there is agreat uncertainty” on the timing, speed and duration of the downward trajectory of inflation in 2023.
In August, the Economic Commission for Latin America and the Caribbean (ECLAC) raised its growth forecast for Mexico from 1.7% to 1.9%.
While the International Monetary Fund (IMF) raised its forecast in July from 2% to 2.4% and the BBVA bank from 1.2% to 2%, which coincides with Vanguard’s projection.
Also, in September the Government revised downwards its estimate of the growth of the Mexican economythe second largest in Latin America, for this year at 2.4%, but projected that it may rebound to 3% in 2023.
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