Mexico’s Economic Outlook: Where Do We Stand?

Mexico's inflation forecast for the end of 2022 increased to 8.15 percent and its estimated economic growth was also raised to 1.9 percent, according to a survey of private sector analysts by the Bank of Mexico (Banxico). Analysts also warned that the effects of price shocks could last longer than estimated and even worsen. Despite these issues, Victoria Rodríguez Ceja, Governor, Banxico, stated that the Mexican economy will not fall into recession in 2023. 

Banxico adjusted its forecasts upwards for headline and core inflation for 2022, as it expects that the effects of price shocks could last longer than estimated or even worsen. It drastically reduced its GDP growth estimate for 2023 to 1.6 percent from the previous 2.4 percent. Headline inflation is forecast to reach 8.1 percent in 4Q2022 and core inflation 7.6 percent, from the prior estimate of 6.4 percent for the former and 5.9 percent for the latter, said Banxico on Wednesday during the presentation of its April-June quarterly report. 

When asked about their perspective on the factors that could hinder Mexico's economic growth, experts noted that the main concerns are associated with governance (45 percent) and inflation (18 percent). In particular, the main concerns are public insecurity (18 percent), inflationary pressures in the country (13 percent), lack of the rule of law (10 percent), uncertainty regarding domestic politics (9 percent), weakness in the external market and the world economy (5 percent), uncertainty about the domestic economic situation (5 percent), the increase in prices of inputs and raw materials (5 percent) and the monetary policy being implemented (5 percent).

"Even though for the following year we are expecting a slowdown derived from all this context, we are not expecting a recession in any case, neither in the US nor in the case of Mexico… The estimates of the International Monetary Fund (IMF), like the ones we have, do not incorporate a recession scenario for the US. However, it has had a recent decrease in its GDP data," said Rodríguez.

Remittances, on the other hand, reported a 16.4 percent increase from January to July 2022, setting the historical record of US$5.3 billion. "Although remittances help economic growth, they do not represent an achievement of the Mexican economy since it is money that Mexican nationals working abroad send to their relatives in Mexico," Gabriela Siller Pagaza, Director of Economic-Financial Analysis, Grupo Financiero Base, told Forbes Mexico.