Private Consumption, Investment Grew in 1Q23

Private consumption and fixed investment in Mexico grew during January and February 2023, reports Citibanamex. However, the bank predicts a gradual slowdown in 2Q23. 

The bank highlighted that Mexico’s domestic demand proved resilient during 1Q23 but private consumption is expected to slow down due to a less dynamic labor market, a more restrictive monetary stance and a deceleration in remittance inflows. Citibanamex reports that Mexico's public revenue remained below the projected target in 1Q23 due to a revenue shortfall, which was attributed to an offset by underspending. 

Private consumption is expected to grow 2.8% year over year, reports Citibanamex. All investment subcomponents are expected to rise, except for residential construction. The year-on-year headline inflation rate hit 6.3% in April, indicating a cooling down of pressure, explained the bank via its report. Core inflation might have also hit a two-year low in April, which led projected headline inflation to increase in April because of the higher prices of food and LP Gas, among other goods. 

The Ministry of Finance and Public Credit (SHCP) revised its estimates downward for both revenues and expenditures for 2023. As of March 2023, SHCP reported a public deficit of MX$98.2 billion (US$5.57 billion), which stood below the projected MX$198.1 billion (US$11.24 billion) deficit. The shortfall was caused by lower oil revenues and a worse-than-projected tax collection, reports Citibanamex. Total expenditures stood below the program, mainly due to lower spending from most ministries, public enterprises and autonomous institutions. 

In January 2023, Citibanamex surveyed several economic analysts and forecasted that Mexico’s GDP could grow by 0.9% annually in 2023, as reported by MBN. The bank also explained that headline inflation expectations for 2023 increased and held stable for the medium term. Headline inflation estimates increased from 5.02% to 5.10% for the end of 2023. However, headline inflation for 2024 remained unchanged for 2024 at 4.00%. Core inflation expectations remained at 5.00% and 3.90% for 2023 and 2024, respectively.