The outlook for Mexico’s economy in 2023 is better than many are predicting, an official says

By Anthony Esposito and Raul Cortes Fernandez

MEXICO CITY, Feb 24 (Reuters) – The outlook for Mexico’s economy in 2023 is better than many had forecast and “more in line” with the 3% growth the government had expected in its September budget, a senior Treasury Department official told Reuters.

Data released on Friday showed Mexico’s economy grew 3.1% in 2022 after slowing to 0.5% qoq in the fourth quarter after expanding 0.9% in the third quarter .

“For 2023 as of now, everything seems to indicate that the outlook is better than many had expected and more in line with what we envision,” Rodrigo Mariscal, chief economist and head of the Treasury Department’s economic planning unit, said in an interview.

The Treasury Department’s 2023 budget, published in September 2022, forecasts GDP growth of 3.0% for Latin America’s second-largest economy this year.

Mariscal, who is helping to develop the economic forecasts that form the backbone of the government’s budget document, said the forecast in the 2024 budget document, which is currently being prepared, should remain largely intact.

He warned that the new budget document could ultimately change by the time it is handed over to lawmakers at the end of March.

Given “the current data, there’s likely to be a soft landing in the United States, which also leaves us in a good position,” Mariscal said, citing the possibility of the US economy slowing without falling into recession .

Mexico’s economy is inextricably linked to the United States, by far its largest trading partner.

Still, the Bank of Mexico warned on Thursday that most of its five-member boards “expect that slower economic momentum at the global level will result in lower growth rates in domestic economic activity in the coming quarters.”

Mariscal said the 2024 elections at home and in the United States made it difficult to predict how Mexico’s economy would perform over the next year. He added the Treasury Department is calculating how much economic activity would be boosted by the recent surge in “nearshoring,” the trend to move production closer to North American buyers and away from Asia to avoid supply chain snarls that are choking production disabled during the pandemic.

Foreign direct investment in Mexico rose 12% to $35.3 billion last year, according to preliminary data, in another sign that nearshoring is gaining momentum. However, analysts have warned that Mexico’s capacity for the nearshoring boom has been hampered by President Andres Manuel Lopez Obrador’s policies, particularly in the energy sector. (Reporting by Anthony Esposito and Raul Cortes Fernandez; Editing by David Gregorio)