Banxico Adjusts its GDP Forecast for 2022

Banxico reduced its forecast for GDP growth in Mexico during 2022 due to the effects the COVID-19 pandemic had on industry, commerce and consumption. Meanwhile, the Mexican peso suffered a setback due to the conflict between Russia and Ukraine.

Banxico’s last quarterly report had increased its projection for GDP growth during 2022 from 2.2 percent to 4.2 percent, but recent economic pressures have led the institution to readjust this forecast. "For 2022, a GDP growth between 1.6 percent and 3.2 percent is expected, with a point estimate of 2.4 percent,” reads Banxico’s latest report. For the first quarter of 2022, economic activity is expected to return to a path of gradual growth supported by external and internal demand. 

Banxico’s report considered numerous long-standing problems, such as the effect of the COVID-19 pandemic on the Mexican economy. But, due to its timing, it failed to consider the emerging crisis posed by the conflict between Russia and Ukraine, which has already hurt the Mexican peso. The currency declined by 0.20 percent from Wednesday to Thursday. The crisis could also lead to an increase in inflation by increasing the prices of raw materials due to the threat of shortages, reports Reuters.

In today's morning press conference, President Andrés Manuel López Obrador said that “the peso has not been affected by the Ukraine-Russia war. The Mexican currency is resisting despite the market’s fears of economic instability due to the Ukraine-Russia war. Let's hope we stay like this and that it does not affect us economically or socially.”

López Obrador had previously said that the increase in oil prices caused by the war "will not affect Mexico’s economy. If the price of imported gas increases a lot, we can start up all electricity generation plants that do not require gas to avoid the increase in electricity costs. We already have that plan. The same for gasoline, there is a subsidy so that even if the price of imported gasoline or crude oil increases, we are prepared."