Mexico’s central bank raised its 2023 economic growth forecast for Latin America’s second-biggest economy as exports and remittances run at record highs.
(Bloomberg) — Mexico’s central bank raised its 2023 economic growth forecast for Latin America’s second-biggest economy as exports and remittances run at record highs.
Banxico, as the central bank is known, estimates that gross domestic product will expand 2.3% this year, according to the main scenario of its quarterly inflation report released Wednesday. In a previous report published March 1, it forecast growth of 1.6%.
For 2024, it revised down its GDP growth expectation to 1.6% from 1.8%.
Mexico saw sustained domestic consumption and strong foreign demand, especially from the US, during the first quarter. The economy is expected to continue benefiting from strong remittance flows and record exports to the US before a slowdown in activity.
Inflation, Key Rate
The central bank also cut its projections for consumer price increases to 4.7% by the end of 2023, from 4.9% in its March 1 publication.
The most recent inflation data showed a bigger-than-expected deceleration in early May, with the annual pace slowing to 6%, down from a peak of 8.8% in August but still more than double the central bank’s 3% target.
The central bank ended its record monetary tightening cycle on May 18 after increasing its key interest rate 725 basis points to 11.25% over 15 straight hikes starting in June 2021. Borrowing costs are now at their highest level since the bank started targeting inflation in 2008.
Policymakers in their post-decision communique remained cautions and signaled that interest rates will need to be held at restrictive levels for a prolonged period.
Economists in a Citibanamex survey published last week kept their 2023 growth forecast at 1.9%, up from 1% in early February. They also forecast that the central bank’s key rate would end the year at its current level.
–With assistance from Rafael Gayol, Dale Quinn, Carolina Gonzalez and Alex Vasquez.
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