Mexico’s economy is expected to be affected by the US economic woes, even if Washington’s debt ceiling agreement averted a major disaster.
Although the deal, approved by the US Senate on June 1, stabilized financial markets and had a positive impact on the peso, doubts remain about mid-sized US banks which could still lead to a recession and hit Mexico as it is a key trading partner, CI James Salazar, associate director of economic analysis at Banco, told BNamericas.
“The fact that there wasn’t one [debt ceiling] The anticipated agreement raised the possibility of a recession. That factor has disappeared or been eliminated, but the risk of a recession remains because the reality is behind it [economic] The prospects are tightening monetary policy, a rapid rise in interest rates and doubts about regional banking,” Salazar said.
The Central Bank of Mexico also highlighted the risks of exposure to the US in its quarterly report published on May 31, revising its 2024 growth forecast to 1.6% from 1.8%, “following a deterioration in the forecast for the growth of the country Industrial production in the USA”. ”
It added: “Starting in the second quarter of 2023, economic activity in Mexico is expected to continue to slow as the external environment remains complex.”
For this year, however, the Monetary Authority is forecasting growth of 2.3% on strong economic resilience, compared to 1.6% in the previous report.
The report said the recent difficulties in US and European financial institutions have not affected national financial markets or the outlook for inflation.
However, “the vulnerabilities identified in the external banking system add another dimension of complexity to an already complicated environment still reeling from the pandemic and war in Ukraine.”
Salazar said, “There is still a possibility of a recession. Because of this, most estimates by those of us who think it could happen towards the end of this year are expecting adjustments for 2023. And those who believe in it [the recession] will be delayed until 2024, we expect adjustments in economic activity to be better reflected in forecasts for next year.”
The central bank’s May survey of private sector analysts showed that 2024 GDP prospects remain at April levels, although the median fell to 1.6% from 1.7%. For this year, analysts are now forecasting growth of 2.05%, compared to 1.68% in April.
In early April, the IMF was forecasting growth of 1.8% for 2023, after posting 3.1% in 2022 and 1.6% in 2024.
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