The Economic Commission for Latin America and the Caribbean (Cepal) joined other international organizations and improved the growth outlook for Mexico’s Gross Domestic Product (GDP) for this year, although it is still well below the projection of the federal government.
According to the new economic projections for the region, this year Mexico would have an expansion of 1.5%, with which a slowdown is expected compared to the result of 3.1% of the previous year.
The projected rate in this new revision is better than the one ECLAC disclosed at the end of last year, when the Mexican economy was expected to grow 1.1% amid fears of a strong recession in the United States, high levels of inflation and the increase in interest rates.
ECLAC pointed out, in general, that the economies of Central America and Mexico will show a slowdown compared to 2022; however, upward revisions were made in some nations due to better economic results in the United States.
“(The improvement is due to) the upward revision of the growth of the United States, the main trading partner and first source of remittances from their countries, which would affect both the external sector and private consumption. In addition, the lower energy prices expected for this year compared to 2022 would act in their favour, given that several of them (economies) are net importers of energy,” the commission indicated.
Although different organizations, such as the World Bank, ECLAC and the International Monetary Fund (IMF) have improved the growth outlook for Mexico this year, the projected rates are still below the government’s expectation.
According to the agency headed by Rogelio Ramírez de la O, this year the growth range will be between 2.2 and 3%, with a point estimate of 3 percent.
cut to region
Although some economies, such as Mexico, had their growth forecasts revised upwards, for the Latin American and Caribbean region in general, the Commission reported a slight cut.
The agency revised downward its forecast from 1.3 to 1.2% for this year, in the midst of what it called a complex external scenario, marked by low economic growth and trade worldwide.
“The growth projection for 2023 for the region is subject to downward risks given the possibility that the turbulence in the global banking system –or the financial system as a whole– could reappear and intensify, which would result in a more persistent tightening of global financial conditions, with the consequent impacts on the access and cost of financing”, he asserted.
Likewise, he still warned about the effects of the prolongation of the war between Russia and Ukraine, which has been going on for more than a year.
In addition to this, the increases in interest rates at the international level to try to combat inflation have also added uncertainty, which was seen at the beginning of March with the financial turbulence registered in the United States and Europe.
“Although inflationary pressures have slowed, it is expected that monetary policy rates will remain high throughout 2023 in the main developed economies,” ECLAC explained.
Limited space
The agency with headquarters in Chile warned that, in 2023, the countries of the region again face a limited space to make fiscal and monetary policy, in an environment still of high inflation and the increase in public debt, especially after the Support granted before the Covid-19.
“Given the recent global financial volatility evidenced by the problems in banks in developed countries and given that regional inflation would remain at levels still high compared to those in force before the pandemic, it is not to be expected that a cycle of monetary easing in the region”, he stated.
Meanwhile, on the fiscal side and given a little room for maneuver, measures will be required to strengthen fiscal sustainability and expand the space by strengthening collection and having a redistributive tax policy.
