The Central Bank pointed out as one of the downside risks a possible lower external demand by the US.

The Bank of Mexico (Banxico) cut its 2023 growth forecast for the national economy, estimating an advance in the Gross Domestic Product (GDP) in a range of 0.8 and 2.4 percent, with a central scenario of 1.6 percent.

The new figures represent a cut from the previous report, which forecast an economy growth of between 1.4 and 3.4 percent, with a central scenario of 2.4 percent.

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On the other hand, the institution maintained its central forecast for 2022, that is, it expects the economy to end up growing 2.2 percent. However, it made changes to the range, which went from 1.6 to 2.8 percent to 1.7 to 2.7 percent.

Banxico acknowledged that inflation was one of the factors taken into account in its report because high price levels deteriorate the growth prospects of the world economy.

“In particular, slower growth is expected in the US economy and in its industrial activity. In this complex context, the forecasts presented incorporate in the forecast horizon the expected effects on the Mexican economy of lower external demand than previously anticipated”, he warned.

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Banxico also mentioned the request for consultations from the United States and Canada under the T-MEC framework due to differences with the energy policy of the current government.

The dispute resolution process introduces a new factor of uncertainty and risk that could affect investment decisions in the country”, he pointed out.

Among the 'good news' in the report is that Mexico's economy may be closer to the level it had before the arrival of the COVID-19 pandemic if the advance in GDP is closer to the upper part of the range forecast for this year, that is, growth of 2.7 percent.

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Original note