Economy

Mexico will grow 0.8% in 2023: S&P

Mexico will grow 0.8% in 2023: S&P

S&P Global Ratings’ economic research team estimates that Mexico will achieve growth of just 0.8% in 2023, down from the 1.9% forecast they made in June.

They explained that the development of the US economy is the main danger for Latin America, especially for Mexico, which is largely dependent on this country to sell its manufactured products.

In the quarterly report โ€œEconomic Outlook for Latin Americaโ€, they explained that weak economic growth in the context of an incomplete recovery in the post-pandemic labor market and with high inflation means political and social pressures, which would lead to increased financial support. be necessary.

Likewise, they cautioned that forecast risks are mainly skewed to the downside, as they are linked to the evolution of the US economy.

They also explained that a 5% decline in real goods exports to the United States would subtract 1.4 points from the growth in Mexico’s GDP, and noted that in 2009, the decline in exports to that country was 10 percent.

What could avoid this effect is the flow of remittances, but they cautioned that the picture is riddled with uncertainty.

In earlier periods of economic weakness in the United States, the flow of remittances to Mexico declined. This was the case in 2009, when there was an annual decline of nearly $4,000 million compared to the outflow observed the previous year.

However, during the pandemic, remittances increased by the equivalent of 1% of GDP.

After 2023, the agency’s research team expects a growth rate lower than structural growth, which is typically 2% “due to low and inefficient investment levels”.

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They noted that “there is significant uncertainty about the course of the US economy due to a combination of well above-target inflation and the Fed’s commitment to controlling inflation through tight monetary policy.”

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They highlighted that a “sharp decline of the US economy” would have negative repercussions on the entire Latin American region through more restrictive terms.

They explained, “Of the major economies in the region, ours will be the hardest hit, with exports to the United States accounting for nearly 28% of Mexico’s GDP.

High rates in 2023

They explain that the region’s largest central banks will keep interest rates at high levels for most of 2023 and will continue until the last quarter of next year when they can start cutting them.

As you may recall, the first emerging central banks to raise interest rates in the global upswing cycle were Brazil in March 2021 and Mexico in June 2022.

The analysis highlights that economies have barely recovered from the impact of the pandemic and that domestic demand, particularly from the service sector, has continued to operate significantly below capacity.

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