Washington DC.- The Mexican economy will grow 1.8 percent this year, 0.1 percentage points more than anticipated in January, indicated the International Monetary Fund (IMF).
For 2024, the agency maintained its estimate for Mexico unchanged at 1.6 percent, according to the World Economic Perspectives report released this Tuesday.
Meanwhile, Latin America and the Caribbean will grow 1.6 percent in 2023, 0.2 percentage points less, and 2.2 percent next year, in a context marked by “stubborn” core inflation.
In updating its economic outlook, the IMF also forecast that Brazil’s economy will expand 0.9 percent, that is, 0.3 percentage points compared to the January forecast.
The IMF stressed that the global economy is languishing, with growth of 2.8 percent in 2023, and 3 percent over the next five years, “the lowest in decades.”
Assuming “recent financial sector tensions are contained,” growth will fall from 3.4 percent in 2022 to 2.8 percent in 2023, before slowly rising and settling at 3 percent over five years: “the forecast the lowest in decades in the medium term,” says the Fund.
The agency expects a pronounced slowdown in developed economies, from 2.7 percent in 2022 to 1.3 percent in 2023.
“The anemic perspective” is a reflection of the rise in interest rates and the “tight policies necessary to reduce inflation,” the agency says.
It is also a consequence of the recent deterioration in financial conditions, the ongoing war in Ukraine and “the fragmentation of geo-economic growth,” the report explains, referring to the increasing trend away from globalization that dominated the economy during the second half of the 20th century to embrace protectionist measures.
And it may be worse with a “plausible alternative scenario, with more stress on the financial sector,” he says. In this assumption, growth would fall to around 2.5 percent in 2023, making it the weakest since the 2001 crisis if the year of the pandemic and the global financial collapse of 2009 are excluded.
Raising interest rates to control inflation has obvious “side effects,” the report says.
“The vulnerabilities of the banking sector have become apparent and fears of contagion have increased in the financial sector in general, including non-bank financial institutions,” it warns.
He refers in particular to the bankruptcy of three US regional banks and the hasty purchase of Credit Suisse by rival UBS.
Inflation will remain high in 2023, around 7 percent globally, but the institution is most concerned about core inflation, which excludes more volatile items such as food and energy.
turbulence
“What we found is that the risks, once again, have weighed heavily on growth and largely due to the financial turmoil in recent weeks,” IMF chief economist Pierre-Olivier Gourinchas told a news conference. .
Despite everything, the IMF is revising its growth forecasts this year for the United States, the world’s largest economy, up to 1.6 percent (0.2 percentage points more than those published in January), and 1.1 percent (0.1 percentage points more ) in 2024.
The euro zone improves to 0.8 percent, as does the United Kingdom, which will end the year in recession but at a better-than-expected level, with a contraction of 0.3 percent.
Germany is also exposed to falling into recession (-0.1 percent in 2023), while Spain fare better with expected growth of 1.5 percent in 2023 and 2 percent in 2024.
China falters
China acts as a global economic locomotive and its recovery alleviates problems in the supply chain. But its prospects are not buoyant either.
After abandoning the zero Covid policy, the Chinese economy will grow 5.2 percent in 2023, but it will slow down from 2024 to 4.5 percent, a very low percentage for the country.
This scenario has led the IMF to change its mind since January: it no longer talks about a “soft landing”, with falling inflation and steady growth in the economy. Now he warns that inflation “is stubborn” and the situation of the financial sector adds uncertainty.
And there are more risks hanging around: “debt levels remain high”, an escalation of the war in Ukraine could send prices of raw materials skyrocketing again and “geopolitical tensions are high”, he concludes.
