Economy 29-11-2018

Central bank cuts growth expectation for Mexico due to increased uncertainty

The Bank of Mexico (Banxico, central) warned of an "increase in uncertainty" due to internal and external factors that may affect the capacity of the country's economic growth, cut in its inflation report corresponding to the third quarter of 2018.

The growth forecasts for 2018 were adjusted downwards from a previous range of between 2 and 2.6%, to one of between 2 and 2.4% this year, in the report published on Wednesday.

For the next, the forecast was also cut, from a previous interval of between 1.8 to 2.8%, to a range of 1.7 to 2.7%.

Among the internal risk factors considered figure "the direction of the economic policy of the new federal administration" of President-elect Andrés Manuel López Obrador.

Regarding inflation, Banxico anticipates that at the end of 2018 it will be 4.7%, above the 4.2% predicted in the previous quarterly report, which increases the probability that the interest rate will rise by 20%. next December, when the new Government has already started.

But Banxico continues to believe that inflation will show a convergence to the 3% target during the first half of 2020.

In addition to the uncertainty generated by the new government, growth would also be threatened by the possibility of cancellation of investments, a delay in the ratification of the new trade agreement with the US and Canada and an escalation of protectionist measures worldwide, especially from the US government.

Other risk factors mentioned are episodes of volatility in the international financial markets due to higher than expected increases in US rates and a delay in the execution of public spending by the new Government.

Regarding internal risks, the report states that if structural reforms are not implemented, such as energy, if the competitiveness of the Mexican economy is affected or if the problems of public insecurity and corruption are accentuated, then an effect will be seen. Negative in the economy.


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