The International Monetary Fund (IMF) has upped its 2021 growth forecast to 6.3%, a 1.3% rise on its last estimation in April and the agency’s third upward revision. Its growth prediction for 2022 was also bumped — 1.2 percentage points to 4.2%.
However, the figure still lags behind the government’s prediction of 6.5% growth for 2021 but above the 6% forecast by independent economists surveyed by Citibanamex.
In line with the revisions, the IMF expects Mexican debt will stand at 59.9% of gross domestic product (GDP) at the end of the year, 0.5 percentage points lower than it predicted in April.
Economic advisor at the IMF, Gita Gopinath, explained the reasons for the improved projection. “In April the effect of the recovery of the export sector was evident and now we see that domestic demand is also growing … [Mexico] is indirectly benefiting from additional U.S. stimulus packages that have somehow increased and strengthened demand,” she said.
The United States’ economy is now expected to grow 7% this year and 4.9% next year, up 0.6 points and 1.4 points respectively.
Another reason for optimism was vaccination, Gopinath added. “The vaccination rate is growing [in Mexico] and will also help accelerate the recovery,” she said.
The economist illustrated the impact the pandemic can have on an economy, using Japan and India as examples. The IMF revised both countries’ 2021 forecasts downwards due to their failures in vaccine administration and containing the spread of Covid-19. For India, where the highly contagious Delta-variant originated, the 2021 forecast was dropped three percentage points to 9.5%.
The IMF’s 2021 predictions for the Latin America and Caribbean region were similarly optimistic: up 1.2 percentage points to 5.8%. Last year, the region contracted 7%, marking the worst performance of any region in the world.
The agency stated that the improved performance was largely down to the region’s two biggest economies. “The forecast upgrade … results mostly from upward revisions in Brazil and Mexico, reflecting better-than-expected first quarter outturns, favorable spillovers to Mexico from the improved outlook for the United States, and booming terms of trade in Brazil,” the report read.