international monetary fund

IMF reduces Mexico growth forecast for this year and next

It predicts 2.1% for 2019 and 2.2% for 2020 due to lower private investment

The International Monetary Fund (IMF) cut its 2019 and 2020 growth forecasts for Mexico by a combined 0.9% today, citing lower private investment.

Mexico will see GDP growth of 2.1% this year, according to the IMF’s World Economic Outlook Update report, a 0.4% reduction on the forecast reported in October.

The IMF predicted slightly higher growth of 2.2% in 2020 but that figure is 0.5% below its October outlook.

The IMF forecast for this year is similar to the growth levels predicted by the World Bank and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).

The former cut its 2019 outlook for Mexico to 2% earlier this month, also citing lower investment as well as political uncertainty, while the latter is predicting 2.1% economic expansion this year.

The expectations are in line with an assurance given last week by President López Obrador that Mexico will grow by 2% this year after the Bank of America (BofA) halved its forecast to just 1%.

The new IMF report comes a day before the official commencement of the World Economic Forum in Davos, Switzerland, which López Obrador said he won’t attend because he has too much to do at home.

The IMF also trimmed its global growth projections for both 2019 and 2020 to 3.5% and 3.6% respectively, 0.2% and 0.1% below October’s projections.

For Latin America, “growth is projected to recover over the next two years

 from 1.1% in 2018 to 2% in 2019 and 2.5% in 2020 (0.2 percentage points weaker for both years than previously expected),” the IMF said.

“The revisions are due to a downgrade in Mexico’s growth prospects in 2019–20, reflecting lower private investment, and an even more severe contraction in Venezuela than previously anticipated,” it explained.

The Mexican peso is currently trading at just over 19 to the US dollar.

Growth forecasts for the United States were unchanged but the figures show that growth of the world’s largest economy is expected to slow.

After estimated growth of 2.9% last year, the IMF predicts that the U.S. economy will expand by 2.5% this year and just 1.8% in 2020.

Explaining the BofA cut, the bank’s chief economist in Mexico, Carlos Capistrán, said that the slow growth forecast for Mexico was 50% due to the slowing of the U.S. economy and 50% due to internal factors.

Source: El Financiero (sp) 

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