Mexico Economic Outlook. March 2023

Summary

Upward revision to our 2023 real GDP growth forecast to 1.4% (0.6% previously); we expect the economy will grow 2.2% in 2024. Private spending will drive growth this year and mitigate the slowdown in manufacturing amid external demand weakness.

Key points

• Key points:
• Gains in real wages and employment support private consumption, together with the recovery of consumer credit and the positive evolution of remittances.
• The labor market continues to show strength. Wage increases and lower inflation will be key to supporting the growth rate of real wages and the wage bill.
• Public debt (% of GDP) will remain stable for the rest of this administration and therefore the risks of Mexico losing the investment grade will be very limited.
• Inflation is slowing down mainly driven by lower non-core inflation, but the core inflation trend points to a more pronounced slowdown in the coming months.
• We expect that Banxico will raise the policy rate to a 11.50% peak, but we anticipate a rapid rate-cut cycle during 2024 that will take the policy rate to 8.50% by the end of the year.

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