Bank of Mexico (Banxico) cut growth expectations in Mexico for the year are 2.4%, lower than the 3.2% forecast last December and a far cry from the forecast of President Andrés Manuel López Obrador, who guaranteed that the economy would grow 5%.
The agency warns that inflation could be higher by the Russo-Ukrainian conflict and by pressures on the prices of raw materials, especially energy or agricultural products, as well as by volatility in financial markets.
In its quarterly report for October-December, Banxico explained that the downward revision for this year is related to the weakening of economic activity in the last quarter of 2021, although it is estimated that between January and March there will be a recovery.
“It is estimated that starting in the first quarter of this year, economic activity will gradually return to growth, supported by external and internal demand. Mexico’s economic performance will continue to be affected by the behavior of the pandemic, both nationally and internationally,” he added.
Lee: It’s neither falling nor advancing: Mexico’s economy stagnates in the last quarter of 2021
He also explained that the escalation of infection caused by omicron variant the spread of the coronavirus at the start of the year could also affect the reactivation expected in the first quarter of 2022.
In addition, the problem of bottlenecks in supply chains at the global level that caused supply shortages for some sectors in Mexico was extended or intensified.
Another red flag for the Mexican economy is a lower recovery in investment spending or not enough to support the process of restarting the economy and long-term growth. In that sense, “it’s possible” power sector reorganization create an environment that is less conducive to investment.
Annual headline inflation remains above the 3% target, hitting levels not seen in two decades by the end of 2021. Nonetheless, the central bank maintained the same inflation forecast as last February.
The forecast is that headline inflation will average 4% in the fourth quarter of this year.
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