Mexico Economic Outlook. Third quarter 2022

Summary

The expectation of economic growth for 2022 improves due to the greater dynamism of the first semester. We revised our real GDP growth rate forecast to 2.0% (up from 1.2%) due to the good performance of the first half of the year driven by the tertiary sector.

Key points

• Key points:
• We revised our real GDP growth rate forecast for 2023 to 1.6% (down from 2.1%) given the future deterioration of private consumption and investment amid an environment of high inflation and more restrictive monetary conditions.
• The creation of formal employment strengthens at the end of the year, however, given our revision to economic growth, we reduce our expectation for 2023.
• We anticipate a gradual slowdown in headline inflation starting in 4Q22; we anticipate that core inflation will not converge towards the target range until 2Q23.
• Banxico sped up its hiking pace: now we anticipate a 9.50% terminal rate for the current tightening cycle, which we expect to be reached by the end of this year.
• We forecast an exchange rate of 20.60 pesos per dollar by the end of 2022 against a peso that continues to show relative strength due to wide interest rate spreads.

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