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February 18, 2022
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The slowest recovery in Latin America, in Mexico: Coface

The slowest recovery in Latin America, in Mexico: Coface

The Mexican economy has the slowest recovery in Latin America and it will be until the end of 2023 or the beginning of 2024 when it will reach the levels prior to the pandemic, warned the economist for the region of the credit insurer, Coface, Patricia Krause.

When participating in the conference “Country and Sector Risk Barometer 2022”, which was held online for the second consecutive year, he explained that there are several downside risks to expect more dynamic growth in Mexico.

Manufacturing remains impacted by the disruption of the global supply chain and therefore depends on its recovery and smooth operation.

He stated that exports remain subject to the dynamics of the United States, who anticipate a moderation in its performance.

Inflation, persistent risk

He added that the persistence of inflation will impact the economy in two ways: by discouraging consumption and by tightening monetary conditions that will affect the availability of credit.

His expectation of economic growth for Mexico is at 2.8%, but he warned that it has significant downside risks.

At the same event, Chief Economist Jean Christhophe Caffet identified inflation as a persistent risk for all world economies. He trusted that it has already reached its highest level and stressed that the control that central banks have already shown with strong increases in rates has been decisive in the downward trajectory of world prices.

For the expert, geopolitical risks such as the war in Ukraine and social unrest will continue to be present in financial uncertainty. For the United States, the world’s leading economy, they estimated growth of 3.7%, lower than the 5.6% observed last year.

monetary tightening

According to Coface economists, the Federal Reserve will make three or four increases in its rate this year, a tightening that will affect emerging markets in the face of a recomposition of portfolios.

The expert on Latin American issues considered that the effect in Mexico will be greater if the Fed takes a more aggressive path in its normalization process, since it will motivate an equally intense response from Banxico.

Krause admitted that inflation has been more resistant than expected by central banks, also in Mexico, and that the upward trend in core inflation shows pressure for the future. A factor that the monetary authorities in emerging economies will not let go either.

The resistance of underlying inflation in Brazil, Mexico and Chile suggests that there is more structural pressure, he argued.

Core inflation eliminates volatile prices due to seasonality or administrative decisions from the measurement, it is the purest measure of inflation and in the case of Mexico it completed 14 months on the rise in January and stood at 6.21 percent.

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