Mexican central bank cuts economic outlook, sees virtually no growth in 2019

Fawad Maqsood August 29, 2019

MEXICO CITY: Mexico’s central bank on Wednesday slashed its economic outlook for this year to forecast virtually no growth, citing slack conditions that will persist for longer than expected after the country narrowly avoided entering a recession.

The Bank of Mexico (Banxico) cut its forecast to predict growth will range between 0.2pc and 0.7pc in 2019, down from an earlier prediction of between 0.8pc and 1.8pc.

Mexico registered no growth in the second quarter from the prior three months, when the economy contracted.

Although Banxico expects the economy to pick up, it said in its latest quarterly report it sees recovery as gradual.

For 2020, Banxico expects the economy to grow between 1.5pc and 2.5pc, down from a previous estimate of 1.7pc to 2.7pc.

Growth risks to the local economy include ongoing global trade disputes, the threat of US measures against Mexico and the possibility the credit ratings for sovereign debt and struggling state oil firm Pemex deteriorate further.

Banxico also cut its inflation forecast for the end of 2019 to 3.2pc from 3.7pc, while maintaining its end-2020 outlook at 3pc.

However, it noted that core inflation, any depreciation of the peso, and US tariff threats could still put upward pressure on prices.

Banxico also said it was important that the 2020 federal budget generate confidence, and for Mexico to strengthen rule of law, battle corruption and respect private property.

The finance ministry is scheduled to send the 2020 budget to Congress by Sept. 8.

Copyright Reuters, 2019

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