High rates and inflation will affect Mexico’s growth in 2023: BBVA

High rates and inflation will affect Mexico’s growth in 2023: BBVA

In the midst of the upward trend of the Bank of Mexico (Banxico), BBVA estimated that the greatest impact of the increase in interest rates will be felt in 2023 In fact, the bank lowered its forecast for economic growth for the following year from 2.1 to 1.6%.

According to the chief economist of the financial institution, This effect will be driven by a decrease in internal demandThis is mainly due to the slowdown in the US economy, among other factors.

and that is The financial institution expects general inflation to close at 7.1% and slow over the next yearwhile Banxico’s reference rate is expected to be around 9.50% at the end of the year.

This will be another headwind for the economy, and it will have a negative impact on consumption and inflation‘,” said BBVA Mexico’s chief economist while presenting the 3Q22 Mexican Situation Report.

Read also: We see huge opportunities in Mexico; It’s a strategic country: BBVA

Despite this, the bank improved its growth estimate for Mexico for 2022, from 1.2 to 2%, due to the good performance of the economy in the first half of the year, although – as it specified – it is starting to show lower signs. Moving.

“It is clear that all economic agents in homes and businesses are facing and will face a challenging environment in the second half of this year and into 2023 in the context of persistently high prices and higher interest rates,” the economist said. Mrs. Salazar.

Similarly, the Mexican economy will also be affected by a possible recession in the second half of 2023 in the United States, due to the conflict between Russia and Ukraine, as well as the inflation crisis that will continue around the world.

The Corporation expects that the US economy will close in 2022 with growth of 2.7%, but by 2023, its progress will be significantly reduced and will only provide a 0.7% increase in its GDP.

For the chief economist at BBVA, this will be a slight recession in Mexico’s main trading partner, which will have a strong impact on our country’s performance, presenting a challenging environment in the second half of 2023.

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