Mexican economy shows encouraging signs: IMEF

Banxico passes the scissors to the GDP forecast and increases the projection for inflation

The Bank of Mexico (Banxico) scissored its growth forecast for the Gross Domestic Product (GDP), while modifying its projection on inflation upwards, amid the high levels that have been reported in recent months, according to with the Quarterly Report from January to March.

Regarding the GDP, the Banxico it took the punctual rate from 2.4 to 2.2% for this year. The central institution, headed by the governor victoria rodriguez Ceja, explained that the Mexican economy could be located between a growth range of 1.6 to 2.8% this yearslightly lower than the previous expectation of 1.6 to 3.2 percent.

“The revisions reflect both external and internal factors, and consider that a complex and challenging environment prevails for the world economy, derived from the effects that persist from the pandemic, to which have been added those caused by the conflict in Eastern Europe. ”, Governor Rodríguez Ceja said in a videoconference.

The document pointed out that the negative bias of the risk balance has been reinforced, where the risks for the growth of the Mexican economy are less external demand, the prolongation of effects on trade and bottlenecks, more stringent financial conditions and episodes of volatility, a lower-than-expected recovery in investment spending, as well as new waves of contagion.

At the other extreme, Banxico pointed out that the factors that can boost the economy are that a lower number of contagions drive a more vigorous economic recovery, that Mexico is an attractive destination for investment, and that financial conditions conducive to an accelerated recovery are maintained. .

Regarding the issue of inflation, the central institution hopes that it will be located above 7.00% at least in the third quarter of this yearwhile for the fourth quarter it would close, on average, at 6.4%, higher than the previous estimate of 4.0 percent.

He pointed out that the pressures have been persistent and greater than expected, including those generated by Russia’s invasion of Ukraine.

The risks for this variable are the persistence of core inflation – on which Banxico is set to make its monetary policy decisions – at high levels, more external inflationary pressures due to the pandemic, as well as those generated by the geopolitical conflict between Russia and Ukraine, in addition to risks due to currency depreciation episodes and higher costs associated with hiring conditions or salaries.

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