Mexico economic growth to be “relatively slow” due to weak FDI flows

14 Oct 2021

The deputy governor of Mexico’s central bank, Jonathan Heath forecasts the country’s economy to start recovering pandemic-fuelled losses in 2023.

However, the growth will be “relatively slow” as a consequence of weak foreign investment flows, according to statements released on Wednesday.

In 2020, Mexico’s economy nosedived 8.5% due to the coronavirus crisis. The country’s central bank – known as Banxico – predicts that the second largest economy in Latin America will expand 6.2% in 2021 and 3% in 2022.

The bank’s deputy governor forecasts that by the end of next year, local economic activity will reach the peak recorded in 2018, says a Reuters news agency report.

“Starting in 2023, we are anticipating an expansion, but also a relatively slow expansion, where the most absent factor is private investment and that is really going to be, I think, the real challenge from 2023 onwards,” Heath said in a podcast published by the Banorte Financial Group.

However, despite his conservative prediction, Heath rebuffed suggestions Mexico is in ‘stagflationary mode’, with substantial rises in inflation stagnant growth and high unemployment rates.

Last month, Mexico’s inflation stood at 6%.

“We are in a process of recovery, we are growing, including expansion above 6%, which is projected this year, so that cannot be undervalued,” the deputy governor went on to say.

“Perhaps it is not enough so that we finish the recovery stage and move on to a new expansion stage, we still have some way to go.”

Heath said that the country’s output gap has been narrowing and is currently close to the zero mark, while in certain sectors it is positive.

“That is why we are seeing the ease with which prices are rising,” he continued.

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