The Mexican economy grew for a second consecutive year in 2022 after the COVID pandemic and associated restrictions caused GDP to fall sharply in 2020.
The national statistics agency INEGI reported Tuesday that GDP expanded 3% in annual, seasonally-adjusted terms last year, a figure just below the International Monetary Fund’s forecast of 3.1% growth.
The figure is based on preliminary growth data for the fourth quarter of 2022 and is thus subject to change when final data is published on Feb. 24.
The economic expansion in 2022 followed 5% growth in 2021 as GDP rebounded from an 8.5% contraction in 2020.
Gabriela Siller, director of economic analysis at Banco Base, said that the 3% growth recorded last year shows that the economy has fully recovered from the COVID-induced economic crisis.
Alfredo Coutiño, director for Latin America at Moody’s Analytics, said in a note that the Mexican economy “didn’t disappoint in 2022, since it performed better than expected.”
The 3% growth occurred against an economic backdrop of persistently high inflation and record-high interest rates as the Bank of México tightened monetary policy in an attempt to put downward pressure on soaring prices.
Nearshoring – the relocation of companies to Mexico to be close to the United States market – benefited the economy in 2022, but growth could have been even higher if the phenomenon was taken advantage of more fully , according to Siller.
Deputy Finance Minister Gabriel Yorio said Monday that consumption and private investment benefited the economy in recent months, and predicted that higher wages and improved labor conditions will aid growth this year.
INEGI’s preliminary data for the fourth quarter of 2022 showed that GDP expanded 0.4% compared to Q3 and 3.6% compared to the final three-month period of 2021. The former figure indicates a slowdown, as quarter-over-quarter growth was 0.9% in Q3.
Nevertheless, GDP has now increased during five consecutive quarters.
The agriculture sector fueled the Q4 growth with a 2% quarter-over-quarter increase in economic activity and a 6.3% increase in annual terms. However, the manufacturing sector outperformed the agriculture and services sectors during the entire year, recording 3.2% annual growth. The agriculture and services sectors expanded 2.8% and 2.7%, respectively.
In view of the latest data, the possibility that stagflation – high inflation, low growth and high unemployment – will afflict the economy has been “practically eliminated,” Janneth Quiroz, deputy director of economic analysis with the Monex financial group, said on Twitter.
A slowdown is predicted in 2023 amid challenging global economic conditions, but Mexico is not expected to go into recession.
The International Monetary Fund on Monday lifted its forecast for 2023 GDP growth in Mexico from 1.2% to 1.7%, while the World Bank is currently predicting a 0.9% expansion “as restrictive monetary conditions, stubbornly high inflation, and softer exports curtail activity.”
The federal government has a more optimistic outlook, predicting 3% growth in 2023.