The central bank has raised its 2021 growth forecast for the Mexican economy by 0.2% to 6.2%.
The Bank of México (Banxico) said in its April-June quarterly report that the main reason for the upward forecast was higher than expected growth in the second quarter of the year.
“Furthermore, due to the advance in the vaccination process and a context of greater mobility and the opening of various [economic] activities, mainly in the service sector, the expectation that the gradual reactivation of economic activity will continue in the second half of the year is maintained,” the bank said.
Banxico also expects that the recovery of the economy in the United States will spur economic activity in Mexico, even as the country faces a large third wave of the coronavirus pandemic fueled primarily by the spread of the highly contagious delta strain.
Bank of México Governor Alejandro Díaz de León acknowledged that the pandemic continues to pose a risk to the economy but asserted that vaccination is offsetting that risk.
“We have two elements, a risk … that could affect the rhythm of economic activity and a mitigating influence that is the vaccination process,” he told a press conference on Monday.
The bank’s 2021 growth forecast is just below that of the International Monetary Fund (IMF), which is predicting a 6.3% expansion.
The World Bank and the Organization for Economic Co-Operation and Development (OECD) are more pessimistic, with both forecasting growth of 5%. The Finance Ministry is expected to revise its growth forecast to 6% when it delivers its 2022 budget next week.
Mexico’s GDP slumped 8.5% last year as the pandemic and associated restrictions ravaged the economy. That was the country’s worst contraction since the Great Depression.
Banxico’s growth forecast for 2022 was unchanged at 3%, more than a point below the IMF prediction of a 4.2% expansion but on par with the World Bank outlook. The OECD is slightly more optimistic, predicting a 3.2% upturn next year.
The central bank also revised its outlook for job creation in 2021, predicting that as many as 840,000 jobs will be added this year, up from a previous maximum forecast of 570,000. As many as 700,000 positions could be added in 2022, the bank said, up from a maximum prediction of 590,000 three months ago.
With regard to inflation, Banxico expects that the rate at the end of 2022 will be 5.7% and predicts that the rate will remain above 5% in early 2022.
The bank cited concerns about inflation earlier this month when it raised its baseline interest rate by 0.25% to 4.5%. Banxico targets 3% annual inflation with tolerance of 1% in both directions
With reports from El Universal