Puerto Vallarta, Mexico – In a recent address at the Economic Perspectives Seminar of ITAM 2024, Alejandrina Salcedo, the Director of Economic Research at the Bank of Mexico, highlighted the significant influence of electoral processes in both Mexico and the United States on Mexico’s economic growth projections. Salcedo emphasized that these electoral events would play a pivotal role in shaping the country’s economic landscape for the year.
According to Salcedo, the Bank of Mexico anticipates economic activity in 2024 to fall within a growth range of 2.3 to 3.7 percent, with a specific growth rate of 3.0 percent. This projection comes on the heels of a 3.3 percent estimated expansion in 2023. While the risks associated with this forecast are seen as balanced, Salcedo pointed out that electoral dynamics, typical of election years, could skew growth more towards the first half of the year compared to the latter half.
Salcedo explained, “Regarding the balance of risks for this forecast, we are seeing it as balanced because we think that there are still risk factors for this growth forecast, especially coming from what may happen to the US economy. We could have a more pronounced acceleration than planned, and on the other hand, we could see an upward risk if the contribution of relocation to our country’s economic growth becomes more evident.”
However, from a private sector perspective, there is a more cautious outlook for growth. Ernesto Revilla, Chief Economist of Citigroup, projected a specific growth rate of 2.2 percent for the current year. Revilla raised concerns about the central bank’s restrictive policies and the potential implications for future growth if interest rate cuts are not implemented in a timely manner. He stated, “If the cuts are not made soon to adjust the rate and keep it in restrictive territory, there is the risk that due to the volatility of the election, especially in the United States, foreign exchange rates, geopolitical issues, the window of opportunity to start adjusting the rate may pass, with implications for growth in 2025-2026.”
In terms of inflation, Alejandrina Salcedo acknowledged that the disinflation process is ongoing, but risks persist. She credited the central bank’s actions for bringing inflation down from over 8.0% in 2022 to the current level of 3.5%, which is expected to be reached by the end of this year. However, the private sector anticipates slightly higher inflation, with projections indicating it may close the year at 4.3%, and underlying inflation at 4.5 percent.
As Mexico navigates the economic challenges posed by electoral processes and global factors, the balance between growth, monetary policy, and inflation control remains a critical focal point for economic policymakers and analysts. The unfolding developments in both Mexico and the United States will undoubtedly shape the trajectory of Mexico’s economy in the coming year.
