The Finance Ministry (SHCP) has cut growth forecasts for 2022 to 3.4%, largely due to high global inflation rates.

The SHCP forecast growth of 4.1% in September, but revised that figure to 3.4% on Friday, and expects 3.5% growth in 2023. Inflation in Mexico hit 7.29% in the first half of March, while U.S. inflation hit 7.9% in February, a 40-year high.

The SHCP’s forecast is more optimistic than the Bank of México’s expectation. The central bank predicts 2.4% growth in 2022. Experts surveyed by the bank expect still lower growth this year, at 1.8%, a far cry from the 5% predicted for the next three years by President López Obrador in February. The last time Mexico achieved two consecutive years of growth over 5% was 1996-97. Prior to that was in the early 1980s.

The SHCP explained its revision by highlighting supply-demand imbalances due to the COVID-19 pandemic and Russia’s invasion of Ukraine, which exacerbated the inflation of food and raw materials prices and could cause shortages of materials for manufacturing and automotive production.

The SHCP said government infrastructure projects, the benefits of the United States-Mexico-Canada Agreement (USMCA) treaty, the minimum wage increase and government social programs were expected to help economic growth by strengthening the domestic market.

The SHCP also expects the price of oil to bolster the economy, which it estimates will average US $92.90 per barrel in 2022 and $61.10 per barrel in 2023. At the beginning of the year, a barrel was expected to average $55.10 per barrel in 2022.

The SHCP predicts inflation to average 5.5% in 2022 and 3.3% in 2023. It expects the peso to be valued at 20.7 to the dollar in 2022 and 20.9 in 2023.

Finance Minister Rogelio Ramírez de la O said Mexico’s dependence on exports exposed it to the unexpected volatility of global markets. Exports make up 40% of the Mexican economy, and “in that part we have had a negative impact that was not contemplated when we calculated the growth rate of 4%,” he said.

With reports from Milenio, El Financiero, and La Jornada