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Mexico lowers economic growth projection for two years
MEXICO CITY, Aug. 30, 2018 (BSS/Xinhua) – The Central Bank of Mexico
(Banxico) rolled back its economic forecast for 2018 and 2019 on Wednesday.
The monetary entity projected the country’s GDP growth of between 2.0 and
2.6 percent for this year, compared to the previous projection of 2.0 to 3.0
percent.
For 2019, Banxico reduced its growth projection to between 1.8 and 2.8
percent, compared to the previous 2.2 to 3.2 percent.
While presenting the second quarter inflation report, Banxico Governor
Alejandro Diaz de Leon said the adjustment is in line with the economic
decline during that quarter, lackluster investment and slowing domestic
consumption.
“A very important piece of data used in this revision is Gross Domestic
Product growth, which clearly was not what was anticipated and led to
revising the outlook,” Diaz de Leon said during a press conference.
The Mexican economy, the second largest in Latin America, contracted 0.2
percent during the second quarter compared to the previous quarter, according
to data released on Aug. 24.
In 2017, Mexico’s economy grew by 2 percent, down from 2.9 percent in
2016.
The local economy still faces some risks in the short-term, including an
escalation of protectionism at a global level, Diaz de Leon said.
There could also be periods of volatility in the international financial
markets, and a prevailing environment of uncertainty that has been affecting
investments, he said.
In addition, the governor said the understanding reached Monday between
the United States and Mexico on the North American Free Trade Agreement
(NAFTA) represented an “important step” which could lead to certainty in
investment.
“The agreement is a very important step in reducing this uncertainty and
we definitely believe it can contribute to larger economic growth in the
event it is finalized with favorable terms,” he said.
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In terms of inflation, Banxico said that higher-than-expected increases in
energy prices will affect the indicator’s path, because the convergence to
the goal will be slower.
The monetary entity is now projecting that inflation will be 3.3 percent
at the end of 2019, compared to the previously projected 3.1 percent.
At the end of 2018, the price index will be at 4.2 percent, compared to
the previous 3.8 percent.
Banxico has a permanent inflation objective of 3.0 percent, with a 1
percent differential in either direction.
“The risk balance for inflation has an upward bias in an environment with
a high degree of uncertainty,” according to the report.
Interannual inflation in Mexico grew 4.81 percent in the first half of
August, according to the most recent information.
On Aug. 2, Banxico decided to leave the key interest rate intact at 7.75
percent, its highest level in more than nine years.
Banxico’s governing board said it would closely follow the evolution of
inflation and adjust its monetary policy in a timely manner to achieve
convergence of the indicator.
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