Mexico Economic Outlook. Second quarter 2021

Summary

Greater economic dynamism due to external impulse and a gradual normalization in 2021. Banxico will remain in a long pause and will not start a cycle of increases until 2023.

Key points

• Key points:
• Partial and gradual recovery of GDP (4.7% in 2021); upward bias in growth, but cautious in a challenging domestic environment
• The industry surprised to the rise in February (0.4% MoM) driven by construction; manufacturing (-2.1% MoM) shows signs of recovery in March
• Expectations of recovery of the formal employment of the IMSS improves. A more dynamic recovery in employment is expected at the end of the year. However, pre-pandemic levels will be reached until 2022
• Headline inflation will rebound sharply -temporarily- in April, but will decelerate rapidly. It is estimated that it will be at 4.2% at the end of the year
• We anticipate that Banxico has entered a prolonged pause, and that the monetary rate will remain at 4.00% during 2021-2022

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