Sunday, June 23, 2024

4 economic forecasts for Mexico from Citibanamex’s 30-bank survey

The Mexican peso will weaken to just under 18 to the US dollar by the end of 2024.

The Mexican economy will grow by 2.2% in 2024.

Mexico’s average inflation rate this year will be just above 4.2%.

The Bank of Mexico’s benchmark interest rate will be 10% at the end of 2024.

These are some of the consensus forecasts derived from the latest Citibanamex Expectations Survey, for which more than 30 banks, brokerages and research organizations were asked to provide economic predictions for Mexico.

The survey results, which include forecasts from major banks such as JP Morgan, HSBC and Banorte, were published Tuesday.

The Mexican stock exchange displays the MXN:USD exchange rate at 17.97
Analysts expect the peso to trade around 18 to the US dollar again in late 2024. (Galo Cañas Rodríguez/Cuartoscuro)

The peso’s future: above or below 18?

The peso was trading at just above 16.60 to the US dollar on Wednesday morning, not too far off from the almost nine-year high of 16.30 it reached last month.

The consensus forecast of the banks, brokerages and research organizations surveyed by Citibanamex is that the peso will trade at 17.90 to the dollar at the end of 2024. That forecast was unchanged from that of the previous survey, conducted two weeks earlier.

A USD:MXN exchange rate of 17.90 would represent a depreciation of over 7% for the peso compared to its current level.

The end-of-year USD:MXN exchange rate forecasts ranged from 16.75 (from the bank Natixis) to 19.80 (from the brokerage Masari Casa de Bolsa).

The consensus forecast for the end of 2025 is that the peso will be trading at 18.66 to the dollar.

GDP growth

The consensus forecast that Mexico’s GDP will increase by 2.2% in annual terms in 2024 is below the International Monetary Fund’s current 2.4% prediction. The outlook is unchanged compared to the previous Citibanamex survey.

The highest growth forecast was 2.8% (from Epicurus Investments and Masari Casa de Bolsa), while the lowest was 1.4% (from XP Investments).

The consensus forecast of those surveyed by Citibanamex is that economic growth in Mexico will slow to 1.8% in 2025.

In 2023, the Mexican economy grew 3.2% in annual terms. Growth was 2% in the first quarter of this year.

Inflation 

The most recent inflation data showed that the headline rate was 4.65% in April, up from 4.42% in March.

The consensus forecast is that Mexico’s average inflation rate will be 4.21% this year. That outlook is up from the 4.17% consensus forecast derived from the previous Citibanamex survey.

The highest 2024 inflation forecast was 4.65% (from the Monex financial group), while the lowest was 3.80% (from Oxford Economics).

In 2025, the consensus forecast of those surveyed by Citibanamex is that inflation will average 3.71%.

The Bank of Mexico currently targets inflation of 3% with a “tolerance” of 1 percentage point in either direction.

Interest rates 

The consensus forecast is that the Bank of Mexico will cut its official interest rate by 25 basis points to 10.75% in June.

Around three-quarters of the entities surveyed by Citibanamex — 26 of 34 — predicted that the central bank will make a 25-basis-point cut to its key rate next month.

The others forecast that a cut of the same size will come in either August or September.

The bank’s governing board will hold its next monetary policy meeting on June 27. Its subsequent meetings will take place on Aug. 8 and Sept. 26.

The Bank of Mexico reduced its benchmark rate to 11% from a record high of 11.25% in March. It left the rate unchanged after the governing board’s meeting on May 9.

The consensus forecast is that the central bank will make additional cuts in 2024 to leave its key interest rate at 10% at the end of the year. That prediction is unchanged compared to the previous Citibanamex survey.

The lowest end-of-year forecast for interest rates was 9% (from Oxford Economics), while the highest was 10.50% (from Masari Casa de Bolsa).

The consensus forecast is that the Bank of Mexico’s official interest rate will be 7.88% at the end of 2025.

Mexico News Daily 

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