Exact forecasts for economic growth vary among experts, but they all agree on one basic thing: 2023 comes with a headwind for Latin America’s second-largest economy. Possible recession in the United States, as well as the risks posed by high inflation, will result in reduced economic activity in Mexico. While the Government predicts growth of between 1.2% and 3%, others have not ruled out a recession.

“Assumes that The United States fell into a mild recession at the end of 2023 and showing growth between 0.9 and 1.5%, having grown by around 2% in 2022, the Mexican economy could grow by around 1.7% in 2023, implying a slowdown”, writes Gabriela Siller, director of economic analysis at Banco Base , in a report to the client. It is estimated that this year, Mexico grew by close to 3%.

The probability that the US falls into a mild recession by the end of next year is 48%, said Siller. “If the recession is moderate or strong, it will also be a recession in Mexico because of lower exports,” the economist added.

Meanwhile, the Mexican Financial Executive Institute (IMEF) published the results of its latest survey, which showed that specialists slightly increased their Gross Domestic Product (GDP) growth forecasts for 2023. “Although GDP growth forecasts improved slightly, from 1.1% on the survey November to 1.2% on the current survey; It continues to show a sharp slowdown compared to forecasts for 2022,” said the IMEF statement.

In a press conference on Tuesday, IMEF president Alejandro Hernández was pessimistic: “A slowdown scenario is entirely possible and I think we are on the verge of a recession. I believe that between this scenario of slowdown and recession there will not be much distance and we are talking about a very decent percentage of economic growth, especially if this bad environment occurs because of the government situation in our country.”

President Andrés Manuel López Obrador has authorized reforms that benefit the country’s energy companies, which can violate free trade agreements with their North American counterparts, and are promoting reforms to the National Electoral College, which enjoys autonomy. In November, data from the Bank of Mexico showed that foreign capital had left Mexico’s stock and bond markets for nine straight months, indicating a lack of investor confidence.

Among the factors behind the expected slowdown are slowing activity in the US, persistent inflation worldwide and high interest rates, but for some analysts, such as firm Focus Economics, insecurity in Mexico as well as internal politics will also have a negative impact. . country.

“Investment will be undermined by political uncertainty,” wrote the company’s economists in a report published last week, “the trade tensions with the US and Canada, the US recession, President López Obrador’s efforts to undermine the checks and balances of politics, and the company’s approach to shore are all risk factors. Focus Economics projects the economy to grow 1.1% in 2023.

GDP is expected to close at 3.1% this year, driven by a strong recovery in the US, the country’s main trading partner, as well as remittances sent by compatriots abroad. The Mexican peso strengthened against the dollar, partly due to an influx of foreign currency from remittances and tourism. For next year, Siller expects it to depreciate to trading above 20 pesos per dollar “given the slowdown in exports, remittances, foreign direct investment, as well as the possible separation of the Bank of Mexico’s monetary policy with the Federal Reserve of States. Joining in. Expects the exchange rate to stabilize at around 20.20 pesos per dollar and goes up to a maximum of 20.50. Anything above 20.50 pesos per dollar would imply a scenario of greater economic or political risk for Mexico”, the expert warned.

Inflation is expected to close the year around 8% and fall to reach the central bank’s target range by the end of 2023, according to Bank of America. The bank expects inflation to close 2023 at 4.6%.

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