IMF raises its growth forecast for Mexico’s GDP in 2022 to 2.4%

The International Monetary Fund (IMF) improved the growth forecast for Mexico this year; However, by 2023, the estimate of the Gross Domestic Product (GDP) was scissored, amid risk alerts for the world economy and a possible recession, according to its latest World Economic Outlook (WEO).

For this year, where efforts are still being made to recover the ground lost by the crisis generated by the Covid-19 pandemic in 2020, the fund expects the Mexican economy to grow 2.4%, a higher rate than its April estimate, when it cut its projection to 2.0 percent.

“Mexico was one of the few economies that improved its outlook for 2022, since the GDP forecast rose from 2.0 to 2.4%, which is understandable in light of the good results that have been achieved in the first two quarters of the year. ”, highlighted Marcos Daniel Arias, Monex analyst.

Although the IMF, led by Managing Director Kristalina Georgieva, increased its growth projection for Mexico this year, it is still below the rate of the 3.4% projection used by the government of Andrés Manuel López Obrador for its estimates. macroeconomic data for 2022, which has not been updated, but one is expected to be held in September, when the Ministry of Finance and Public Credit (SHCP) presents the 2023 Economic Package, with its respective General Economic Policy Criteria.

These new growth projections come amid fears of a possible global recession in the short term, this as the Covid-19 pandemic continues, with a period of high inflation, the tightening of monetary policy in several countries to face rising prices, and tensions in Eastern Europe.

In past months, several institutions cut their growth expectations for Mexico, while raising their inflation estimates. Currently, various projections point to economic growth of less than 2.0 percent.

Scissors by 2023

In contrast to the projection for this year, in 2023 the IMF sees a lower-than-expected growth outlook for Mexico. Now, it forecasts that the Mexican economy will grow 1.2%, a figure lower than the projection of 2.5% in April.

The decrease of 1.3 percentage points compared to what was previously estimated in April places Mexico among the countries that lead the falls in its growth projection – the United States and Spain share the same reduction –, only below the revision of 1.9 percentage points To Germany.

“Considering the IMF figures, Mexico would be the only G20 economy that would not have recovered at the end of 2023 and in the ranking it would be only above Russia, whose statistics have collapsed since the war,” explained the Monex analyst .

He added that the downward revision is in line with the modifications, also downward, of the GDP of the United States, Mexico’s main trading partner. In this case, its projection went from 3.7 to 2.3% for this year, and from 2.3 to 1.0% for 2023.

“It is likely that the contagion mechanism is through exports, remittances and higher interest rates,” he said.

recession foretold

Given the historic relationship between Mexico and the United States, which aims to experience a recession in the short term, several institutions have indicated that the country will not be able to save itself from a contraction of its economy in 2023.

The most recent was Moody’s Analytics, which considered that this could happen in the middle of next year, with a duration of nine quarters, amid still high levels of inflation, and high interest rates by the Bank of Mexico (Banxico) .

This fall in the Mexican economy is consistent with the historical elasticity reported in recent crises and with the interdependence of the economic cycles of the two nations”, added Moody’s Analytics.

In this way, López Obrador’s six-year term would be marked by three years of GDP contractions: in 2019, with a slight drop of 0.1%; in 2020, when the Covid-19 crisis dropped the Mexican economy by 8.5%; and the following year.