Mexico Economic Outlook. December 2022

We expect lower growth and inflation in 2023. GDP would grow 3.0% in 2022 driven by the manufacturing sector. We stick to our 0.6% GDP growth forecast for 2023 but with an upward bias considering the 3Q22 data, INEGI’s revisions, and the effect of nearshoring.

Key points

• Key points:
• The labor market has shown strength with positive effects on the real wage bill; we expect a lower job creation in 2023.
• It is very likely that the public deficit will be at least 3.6% in 2023 given the pressures on public spending and lower-than-programmed tax revenues.
• November will mark the peak of core inflation; headline inflation is already declining. We are more optimistic than the consensus for 2023.
• We anticipate that Banxico will decouple from the Fed in 2023; we expect the start of a rate cut cycle by the third quarter of next year.
• We expect the exchange rate will be 19.6 pesos per dollar by December 2022 and 20.1 pesos per dollar by the end of 2023.

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