Mexico’s economy is set to grow up to 3.0% in both 2023 and 2024, driven by increased manufacturing investment and cooling inflation, according to the government’s latest budget forecasts. The Latin American country is expected to claw back the losses caused by the pandemic, expanding between 2.2% and 3.0% this year and between 1.6% and 3.0% in 2024. The ministry’s document also showed that the lower end of the range for 2023 was adjusted upwards due to the country’s good economic performance.
Mexico’s inflation rate is forecast to slow to 5.0% by the end of this year and to 4.0% by the end of 2024. As central banks around the world rush to hike interest rates and slow inflation, Mexico’s central bank increased rates by 25 basis points to 11.25% on Thursday. However, the bank hinted that the hiking cycle could be nearing its end. The Mexican government said that international rate increases have not compromised its public finances.
The finance ministry forecast Mexico’s crude oil export mix to average $66.60 per barrel this year, slipping to $56.30 next year. Exports from state oil company Pemex represent a significant source of tax revenue for the government. The ministry also estimated total crude output to be 1.877 million barrels per day this year, mostly coming from Pemex operations, and ticking up to 1.914 million barrels per day in 2024. The Dos Bocas refinery, a project led by President Andres Manuel Lopez Obrador in the Gulf state of Tabasco, is expected to operate at full capacity next year.
Mexico is primed to benefit from private investment fuelled by “near-shoring,” or the trend of moving production to North America from Asia, the ministry said. The country could receive a 1.2 percentage point boost to GDP as a result, without specifying a time frame. The ministry anticipates a boost to foreign investment in manufacturing, particularly in the automotive industry, which is a “natural candidate” to take advantage of near-shoring. Electric vehicle maker Tesla recently announced it would build a “gigafactory” in the northern border state of Nuevo Leon, creating up to 10,000 jobs and bringing in up to $10 billion in investment.
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