Mexico Economic Outlook. First quarter 2022

Summary

Challenging outlook for the Mexican economy in 2022 due to contagions, high inflation, and higher interest rates; we anticipate that Banxico will increase the policy rate until reaching 7.0% by the end of the year

Key points

• Key points:
• Downward revision to our GDP growth estimate for 2022, from 3.2 to 2.2%, due to 2021 weakness, bottlenecks extension, higher prices, and a tighter monetary policy
• Core inflation will continue with an upward trend that will decelerate more slowly than headline inflation; the latter will begin a downward trajectory but will remain above 4.0% throughout the year
• The labor market still shows significant levels of slack; we forecast that 618,000 new jobs will be created during 2022 and the unemployment rate will be 3.4% by the end of the year
• The expected stability of public debt (% of GDP) and anticipation of higher tax revenue mitigate the risk of losing the investment grade in the next two or three years

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