US and Mexico will enter recession this year: Bank of America Securities

The economies of the United States and Mexico will enter a recession this year, as a result of the tightening of financial conditions and the impact that this contraction will have on the flow of remittances and on the demand for manufacturing, warned the chief economist for Mexico and Canada at Bank of America Securities, Carlos Capistran.

It estimates that the recession in the United States will be 0.5%, a fall that could begin in the second quarter of this year and could last up to three quarters.

He recalled that the recession in the United States is always replicated in Mexico, but with greater intensity. However, in this episode he considers that it will be parallel, thanks to the impact that the relocation of productive investments from China to Mexico already has.

At the presentation of Economic Outlook for 2023considered the Meeting of the three trading partners to be a powerful message for investors in the context of nearshoring.

Investors say where I put money and here you have the trade agreement, and the photo of AMLO with Trudeau and Biden, and a small fiscal deficit, clearly there is a big difference with other emerging countries such as Brazil, Turkey or South Africa.

He said that the trade agreement with the United States and Canada is an opportunity that other emerging markets do not have and that generates significant appeal for investors.

He considered that this same story of investment relocation that has already been seen since the first quarter of 2022 will help an economic recovery by 2024, which will lead to GDP growth of one percent.

He also considered that the challenge for this year will be focused on Banco de México, which must deal with inflation outside the target, in a year that will have an economic contraction and must decide whether to continue rising as well to maintain the high rate differential with the Fed. In fact, it estimates that inflation will average 4.8 percent at the end of 2023.

In the context of the nomination of Omar Mejia Castelazo to join the Governing Board recognizes that there is less and less experience in the members of the collegiate body but that the institutionality and independence persists.