The Mexican economy is likely to slow with expected growth moderation in the United States, a “Reuters” poll showed.
Mexico’s gross domestic product (GDP) expanded more than expected from the second half of 2022 to the beginning of this year, as low unemployment supported private consumption and remittances reached record levels, driving up the strong peso.
Mexico’s central bank is expected to keep its key interest rate at a record 11.25% until the last three months of 2023, when it expects a small cut of 25 basis points, as inflation remains relatively high near the 5.0% mark at that time.
Analysts noted that moves to move production to Mexico from China could add a boost.
On the downside, Latin America faces risks from an El Nio weather pattern, characterized by warming water temperatures in the Pacific Ocean, that could spark food inflation and damage crops. Some initial impact has already occurred in Peru and other Andean countries.
Meanwhile, the effects of the credit crunch triggered by the longest period of monetary tightening among major economies are resurfacing in Brazil, where estimates point to a potential drop in gross domestic product (GDP) growth to 1.5% next year.
This downward trend should be offset by increased social spending, which could, in theory, be financed by additional tax revenues resulting from the planned fiscal reforms that the government wants to introduce next month, including measures affecting the wealthy.
