Banxico Updates Mid-year GDP Forecast

Banxico adjusted its GDP forecast from 5.8 percent to 6.1 percent year-on-year and expects 2021 to close with a 5 percent inflation rate. The bank also adjusted its GDP forecast for 2022 from 2.8 percent to 2.9 percent. 

Mexico is presenting continuous and consecutive growth during 2021. Previously, analysts had adjusted the GDP forecast for this year from 5.8 percent to 6.0 percent. Now, it has updated its forecast again and anticipates the year to close with a 6.1 percent growth in GDP.

Mexico’s central bank also changed its inflation forecast. According to Banorte’s experts, “the estimates continue to be adjusted upwards due to persistent upward surprises in the fortnightly data, both due to increases in commodities (which in turn drive other prices) and due to changes in consumption patterns ... Expectations for the next twelve months rose to 3.5 percent. Finally, for the end of 2022, they point to general inflation of 3.7 percent, with underlying inflation at the same level.”

Despite this, Banorte explains that there are expectations that medium-term inflation will revert downward, with long-term inflation unchanged. Similarly, the estimates for the underlying inflation in the medium and long term were unchanged, both at 3.5 percent.

Banorte’s analysis of Banxico’s recent survey on economic expectations, mentions that governance remains the main obstacle to economic growth. “The factors that have marked this difficulty the most are Governance with 47 percent of responses,” writes Banorte. Other obstacles include internal economic conditions with 29 percent of responses, public finances with 12 percent, inflation with 7 percent, public insecurity with 16 percent, domestic political uncertainty with 14 percent, uncertainty about the domestic economic environment with 10 percent and the weakness of the domestic market with 10 percent.

Governance continues to be a concern among investors worried about Mexico’s growth and economic recovery. Previously MBN  reported that other countries mentioned a reluctance to invest if Mexico does not make substantial improvements to its rule of law. To invest, companies need an environment of institutional certainty.