This 2022 will be complicated. Here are ten challenges; there is no order of importance:
1. As long as the government does not have a corrective strategy for its pandemic management disaster, it will continue to pose a major risk to health and the economy. The development of new strains with higher transmissibility rates cannot be ruled out.
2. The rebound in economic activity in 2021 came to an end and it will lose even more traction in 2022, inhibiting a full recovery in growth and employment. Without an unrestricted rule of law and respect for property rights and contracts, as well as a decisive fight against insecurity and the widespread activities of organized crime, private investment will not revive.
3. To avoid an overflow of the rise in inflation, it will be crucial for Banco de México to carry out a monetary policy throughout the year that is consistent with anchoring expectations and continuing the cycle of interest rate hikes.
4. However, monetary policy will face a new challenge when the Federal Reserve (Fed) begins its cycle of raising its interest rate, probably in the second half of 2022. This will lead to an additional complication by putting pressure on the exchange rate.
5. Public finances are projected to be fragile and with the potential to deepen budget distortions. The greatest risk will be pressures on the target of the primary deficit and that a higher public debt will be triggered, already high by 51% of GDP.
6. The alleged electricity reform is a major risk and, although with variations, it may represent one of the greatest setbacks in decades in the development of the electricity sector and therefore have profound implications for the entire economy.
7. The effectiveness of the T-MEC will depend on not violating the chapters on energy and investment.
8. The exchange rate is expected to continue to trend towards a moderate and orderly depreciation, but much of its trajectory will depend on when the Fed begins its cycle of interest rate hikes.
9. The stagnation of economic growth, rising inflation, greater financial problems in Pemex and CFE with a consequent deterioration in public finances could lead the rating agencies to lower the rating of sovereign debt at some point in 2022. However, notch drops would not yet bring the rating into the investment grade loss zone.
10. Finally, the president will fully enter the promotion so that Morena’s candidate wins the 2024 election. Unfortunately, true to his style, he will persist in his desire for confrontation and division, trying to consolidate his biased one-man presidentialism towards authoritarianism and populism.
Twitter:@frubli
Economist
IMEF Magazine
Economist graduated from ITAM. He has master’s and doctoral studies in monetary theory and policy, and international finance and trade. Columnist for El Economista. He has been an advisor to the Governing Board of Banxico, Director of Institutional Linking, Director of External Relations and Coordinator of the Governor’s Office, Manager of External Relations, Manager of Macrofinancial Analysis, Assistant Manager of Macroeconomic Analysis, Assistant Manager of International Economy and Analyst.
