Mexico Economic Outlook. October 2022

Summary

Headwinds will slow economic growth in 2023. We revised down our growth estimate for 2023 to 0.6% (previously 1.6%), given lower growth of domestic demand in an environment of high inflation, higher interest rates and lower growth in the United States.

Key points

• Key points:
• We keep our growth estimate for 2022 unchanged at 2.0%, considering the rebound in 1H22, but with a slowdown going forward.
• We anticipate lower job growth than our previous forecast. Next year the wage bill will likely show less dynamism.
• We anticipate inflation to edge down by year-end and to markedly ease over 2023 until it reaches levels around 4% by December.
• Banxico will not decouple from the Fed in the short term and will take the policy rate to 10.50% by year end and to a 10.75% cycle peak by February.
• We anticipate the peso to keep outperforming other emerging market currencies and to remain relatively strong; we forecast 20.3 and 20.5ppd exchange rate levels by year-end 2022 and 2023, respectively.

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