The war between Russia and Ukraine, the persistence of high levels of inflation for longer than expected, weather factors, as well as the possible slowdown of the economy in China are factors that, if they occur or worsen, would have a negative impact on the growth of the Mexican economy this year, which is still looking for a recovery after the Covid-19 crisis.
In the General Criteria for Economic Policy (CGPE) 2023, the Ministry of Finance and Public Credit (SHCP) states that in the face of a challenging scenario, the Gross Domestic Product (GDP) will have a punctual growth of 2.4% this year, with a range between 1.9 and 2.9 percent.
“Only in the first half of the year, the economy registered an expansion of 1.9% at an annual rate, from which it is calculated that, if there were no more growth in the rest of the year, economic activity could show a variation positive of 2.0% per year, with seasonally adjusted figures. However, the good economic dynamism is expected to continue”, explained the agency in charge of Rogelio Ramírez de la O.
In the remainder of the year, the Ministry of Finance expects economic growth to be driven by the performance of employment and the increase in labor income, which will support domestic private consumption; the increase in productive capacity as well as the dynamism of the external sector, which will be reflected in manufacturing exports as well as income from remittances and tourism.
However, the Treasury detected four factors that can play against the Mexican economy, where the conflict in Eastern Europe stood out, which can reduce the dynamism of activity in Mexico, especially if more episodes of price volatility are created energy, there is a shortage of fertilizers and/or food, and less foreign investment.
On the other hand, higher levels of inflation for longer would also be a drawback, since a tightening of monetary policy by various central banks would be needed to combat them.
Two other impacts can come from weather factors, such as droughts or floods, which can also affect consumer prices, as well as the slowdown in the Chinese economy due to structural problems in its economy.
if you underestimate me
Despite fears of a slowdown in the economy of the United States, Mexico’s main trading partner, the Ministry of Finance chose not to consider it among the risks for the economy this year.
“Although there have been signs of an economic slowdown in the United States, our main trading partner, there is still no hard evidence of a recession. The foregoing, mainly, in a context of strength in industrial production, the labor market and the growth of private consumption in the first half of the year”, considered the Treasury.
The foregoing, said James Salazar, deputy director of Economic Analysis at CIBanco, may lead to public revenues being overestimated, since if a slowdown in the neighboring country to the north materializes, there would inevitably be an effect on the Mexican economy.
The United States is also facing a period of high inflation, levels not seen for decades, which is why the Federal Reserve has increased its interest rates. There is more marked the impact that the rise in rates can have, especially in the consumption part. And the fact that the United States is losing strength is something that is also important for the Mexican economy,” he added.
The analyst added that other factors that can also affect growth are the issues that are taking place in the T-MEC, the uncertainty generated by some decisions of the López Obrador government, as well as the Covid-19 pandemic, which is still It does not finish.
Services could be recovered at the end of the year
The recovery of the economy in Mexico continues this year, especially in the services sector, the activity that was most affected during the Covid-19 pandemic and, although it has recovered, it is lagging behind compared to the agricultural and livestock sectors. of industries.
“As the normalization of activities continues to the conditions prior to the pandemic, it is expected that the sectors related to the internal market will register important advances, which will allow the activities that are lagging behind with respect to their pre-pandemic levels to close. that gap and those that have already recovered continue to grow,” he stressed.
In particular, the government highlighted services related to temporary accommodation, as well as food and beverage preparation, as the biggest losers during the pandemic due to confinement and social distancing measures.
ana.martinez@eleconomista.mx
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