Mexican economy to slow in 2024 due to US uncertainty

Mexico will suffer from the economic problems of the United States, despite Washington’s decision to raise the debt ceiling, which prevents further consequences globally.

The agreement, which was approved by the US Senate on June 1, removed a major factor of uncertainty in financial markets and, with positive consequences for the peso, lingers doubts about the stability of medium-sized banks in the United States. That, in turn, could unleash a recession without Mexico, the US’s largest trading partner, unable to escape the economic blow suffered by its neighbors to the north, James Salazar, CI Banco’s deputy director of economic analysis in Mexico, told BNamericas.

“The reality is that there is no agreement [sobre el techo de la deuda] A recession is expected. That factor has been dissipated or eliminated, but there is a risk of stagnation because of what lies behind this outlook [económica] “It’s tight monetary policy, a rapid rise in interest rates and lingering doubts about regional banks,” Salazar said.

Mexico’s Central Bank (Panco) warned of risks to the US exposure in its quarterly report published on May 31 and lowered the national economy’s 2024 growth expectation from 1.8% to 1.6%. Decline in Growth Forecast for US Industrial Production.”

“In general, a slowdown in economic activity in Mexico is expected to continue in the second quarter of 2023 due to the persistently difficult external environment,” he added.

However, for the end of the year, PANSICO raised its central forecast to 2.3%, from 1.6% in the previous report, supported by the resilience of the national economy.

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Recent difficulties by some financial institutions in the US and Europe have not had a significant impact on domestic financial markets or the country’s inflation outlook, the report said.

However, “the vulnerabilities identified in the external banking system add a critical dimension to an already complex environment, which is still affected by the pandemic and the war in Ukraine,” Banksiko said.

Salazar explained: “There is still a chance of recession. That’s why we see corrections in 2023 in most estimates of those who think it could happen before the end of the year. [la recesión] This will be delayed until 2024, when changes in economic activity are more noticeable in forecasts for the following year.

The Census The agency, which publishes private sector analysts’ expectations for May, said its outlook for gross domestic product for 2024 remained close to April’s, although the average fell to 1.6% from 1.7%. This year, analysts forecast Mexican GDP to grow 2.0% in April, instead of the 1.6% forecast in April.

In early April, the IMF Advertising It expects growth of 1.8% in 2023 after 3.1% in 2022.

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