Mexico Economic Outlook. June 2023

Upward revision in our 2023 growth estimate to 2.4% (1.4% previously); the resilience of domestic demand drives growth this year. We anticipate a slowdown in 2H23 due to lower external demand, with a carry-over effect on 2024.

Key points

• Key points:
• The dynamism of private consumption continues given the gains in real wages and formal employment; investment in machinery and equipment shows a rapid growth pace amid the normalization of manufacturing production.
• Outlook for formal job creation improves for 2023. The expected decreasing dynamics of inflation and upward revisions to employment will continue to boost the real wage bill.
• Public debt (% of GDP) will remain stable in 2023-24 and therefore the risk of Mexico losing the investment grade will be very limited.
• The decline in inflation has been driven mainly by lower non-core inflation, but the pace of decline in core inflation has gained traction.
• We anticipate that, with falling inflation, Banxico will start a rate cut cycle in 4Q23 to avoid an additional increase in the real ex ante rate.

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