Monday, March 4, 2024

World Bank raises 2023 forecast for Mexican economy to 2.5%

The World Bank has improved its 2023 growth forecast for the Mexican economy to 2.5% from just 0.9% in January, but Mexico will still record lower growth than last year even if that level of GDP expansion is achieved.

The significantly more optimistic forecast was included in the bank’s latest Global Economic Prospects (GEP) report, which was published Tuesday.

Meat on display for sale at a butcher's stand in a Mexico City market.
At 2.5%, the World Bank’s new growth prediction is a significant improvement over the one it made in January, which was only 0.9%. (Graciela López Herrera/

The prediction comes after the national statistics agency INEGI reported in late May that Mexico’s GDP increased 3.7% in seasonally-adjusted terms in the first quarter of 2023 compared to the first three months of last year.

While the World Bank’s latest forecast is a considerable improvement from that in its January GEP report, the level of growth it is predicting is 0.6 percentage points lower than the 3.1% economic expansion recorded in 2022. The bank acknowledged the anticipated downturn in its report.

“Mexico’s growth rate is expected to slow slightly to 2.5 percent this year, amid tighter monetary policy,” the World Bank said.

“With inflation having fallen from its peak last year, the central bank has paused the monetary contraction. This comes after a series of rate hikes, from 4 percent in mid-2021, and reaching 11.25 percent in April 2023.”

BMW plant in San Luis Potosí
Foreign investment from companies like Germany’s BMW (plant pictured here) has contributed to strong GDP growth in 2023’s first quarter. (BMW Group)

The bank also said that “fiscal policy is not expected to support growth in 2023 given its focus on the completion of landmark public investment projects and social programs.”

The Maya Train railroad, the Isthmus of Tehuantepec Interoceanic Corridor and the Olmeca Refinery on the Tabasco coast are among the projects the current government is aiming to complete while it continues to support millions of citizens through welfare programs, including the Sowing Life reforestation and employment initiative and the Youths Building the Future apprenticeship scheme.

Foreign investment was strong in the first quarter of 2023 and consumer confidence increased slightly in May, but the World Bank said that “investment and consumption, which were stronger than expected in late 2022, are expected to be somewhat subdued this year as a result of high interest rates and inflation.”

The bank is now forecasting growth of 1.9% in 2024, down from a 2.3% prediction in January.

Finance Minister Rogelio Ramírez de la O last month predicted growth of at least 2.3% this year, while President López Obrador asserted last week that Mexico’s GDP will expand 4% in 2023.

The World Bank anticipates global growth of 2.1% in 2023, compared to 3.1% growth last year, and a 1.5% expansion across Latin American economies.

Its 2023 forecast for Mexico’s largest trade partner, the United States, is growth of 1.1%.

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