The federal government must be given time for its economic decisions and actions to yield results, a new deputy governor of the Bank of México said today.
In an interview with the state news agency Notimex, Jonathan Heath said he expected economic growth to strengthen – possibly towards the end of this year – although the International Monetary Fund (IMF) last month cut its 2019 and 2020 growth forecasts for Mexico by a combined 0.9%, citing lower investment.
“Just because we’re seeing a temporary slowdown now, there’s no need to be pessimistic and think that everything’s bad. You have to give it time for everything to begin to fit into place and to redirect the growth of this country,” Heath said.
“We’re going through difficult times [but] it’s not going to be something that’s permanent, rather I’m sure that, in a while, we’re going to see better news on the horizon,” he added.
Heath, a University of Pennsylvania-trained economist, said it was natural for the first year of a new government to be complicated, explaining that the López Obrador-led administration is trying to redirect public spending and that can cause difficulties in the short term.
He said that while it was very likely that there will be a significant economic slowdown in the first half of this year, steps taken by the new government – such as austerity measures, the introduction of a northern border free zone, the crackdown on fuel theft and the undertaking of infrastructure projects – could start to have a positive impact towards the end of the year or at the start of 2020.
“Sooner or later, they have to start delivering results. We’re starting in a very uncertain environment both externally and internally but I believe that the government is very conscious of that and little by little we’ll put things in their place and create the [necessary] environment [for the economy] to be able to grow,” Heath said.
The deputy governor explained that the gasoline shortages, teachers’ rail blockade in Michoacán and strike action by workers in Tamaulipas would all continue to impact negatively on the economy in the short term but added that they are temporary issues that will be resolved.
“. . . I have complete faith that down the road we’ll see much more favorable conditions,” Heath said.
He highlighted that inflation slowed in the first half of January and said that it would likely continue to trend downwards, allowing it to reach the bank’s target of 3% – if not by the end of this year, definitely during 2020.
Heath said that there is now greater stability in energy prices, particularly with regard to the cost of gasoline, whose spike at the start of last year contributed to the inflation rate ending 2018 at 4.83%.
He explained that the bank will closely monitor inflation in order to take appropriate monetary policy decisions, adding that it was very difficult to predict what will happen with the benchmark interest rate, which is currently set at a 10-year high of 8.25%.
He described President López Obrador’s respect for the autonomy of the Bank of México as “a kind of anchor,” which to a certain extent guarantees Mexico’s macroeconomic stability.
The 64-year-old economist, who has more than 30 years’ experience analyzing the Mexican economy, will remain as a Banxico deputy director and sit on the central bank’s board until 2026.
Heath said that he was conscious of the responsibility he has taken on and the decisions “of great importance” he will make as a board member.
He added that he had a lot of fun in his “previous life” and expects to keep enjoying himself in his new role.
“For me, it’s really fascinating to look at and analyze economic indicators, interpret them, try to formulate outlooks, try to see where the country’s going. That’s what has fascinated me and I’ll keep doing it, just in another environment with another level of responsibility,” Heath said.
Heath contended that it didn’t matter whether Mexico moved towards the right or towards the left politically speaking, the most important focus for the government remained constant: that the economy grows, that more jobs are created, that wealth is distributed more equally and that poverty is reduced.
Joining him as a new deputy governor and member of the central bank board is Gerardo Esquivel, a Harvard-trained economist who previously served as an economic advisor to López Obrador.
Heath said he was confident that both he and Esquivel would contribute to the strengthening of Banxico and help it to achieve its main goals of ensuring purchasing power stability, especially for lower socio-economic classes, and creating an environment of macroeconomic stability capable of helping Mexico to achieve higher growth and greater development.
The five-member Banxico board also includes Governor Alejandro Díaz de León and deputy governors Javier Guzmán and Irene Espinosa.
Source: Notimex (sp)