Mexico’s Central Bank Cuts 2011, 2012 GDP Forecasts
(Corrects time frame in seventh paragraph.)
Mexico’s central bank lowered its forecast for economic growth this year and next while keeping its consumer price forecasts unchanged, according to its quarterly inflation report published today.
Banco de Mexico cut its 2011 economic growth forecast to a range of 3.8 percent to 4.8 percent and its 2012 forecast to 3.5 percent to 4.5 percent. The bank in its May report had seen 2011 growth of 4 percent to 5 percent and 2012 growth of 3.8 percent to 4.8 percent. The central bank kept its 2011 and 2012 consumer price forecasts at 3 percent to 4 percent.
“The balance of risks for growth in the Mexican economy has deteriorated,” the bank said in the report. The risks for inflation “have moderately improved,” the report said.
Economists at JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp. and Grupo Financiero Banorte SAB have reduced their Mexican economic growth forecasts on signs of economic weakness in the U.S., which buys about 80 percent of Mexico’s exports.
Mexico’s economy will grow 4.2 percent in 2011, according to the median estimate of 13 economists surveyed by Bloomberg.
Mexico’s economy will feel the effects of the “debt problems” in the U.S. and Europe and so the risks of lower economic growth in Mexico are now greater, bank Governor Agustin Carstens said at the at the central bank in Mexico City today. Global economic growth has leveled out, he said.
‘Mexico Stands Out’
The “difficulty of creating a sustainable debt situation in European countries has elevated market uncertainty,” Carstens said. The U.S. Federal Reserve’s decision to keep interest rates at an all-time low through mid-20132 to revive a recovery is “very important.”
In a report e-mailed to investors today, JPMorgan said Latin America’s second-biggest economy will expand 4.2 percent in 2011, down from an earlier forecast of 4.5 percent, and 3.2 percent in 2012 from a previous forecast of 3.8 percent.
Credit Suisse Group AG today reduced its 2011 growth forecast for Mexico to 3.9 percent from 4.2 percent, and its 2012 forecast to 3.2 percent from 3.5 percent, according to a research note e-mailed to investors.
Rate Outlook
The central bank will increase the nation’s benchmark lending rate from a record low of 4.5 percent in September 2012, according to yields on futures contracts for the 28-day TIIE interbank rate.
With inflation pressures rising in nations such as Brazil and China, “Mexico stands out because inflation has been relatively well behaved here,” Carstens said.
Lower prices for grains on international markets should help keep inflation in Mexico in check, he said.
Policy makers at their last meeting on July 8 kept the rate unchanged for a 20th straight meeting, Carstens said, because of the favorable evolution of the exchange rate, a slower narrowing of the output gap, the limited impact of commodity prices on inflation and inflation expectations and also because inflation expectations are well-anchored.
Annual inflation quickened to 3.55 percent in July, the national statistics agency reported yesterday. Inflation will accelerate to 3.6 percent by year-end, according to the median forecast in a survey by Citigroup Inc.’s Banamex unit.
Mexican gross domestic product expanded 5.4 percent last year, the most in 10 years.
Mexico’s peso has lost 5.1 this month and the benchmark IPC stock index has dropped 10 percent over the same period following Standard and Poor’s downgrade off the U.S.’s top credit rating and volatility in global markets.
The peso fell 2.6 percent to 12.3563 per dollar at 3:12 p.m. New York time from 12.0391 yesterday.
To contact the reporter on this story: Jonathan Roeder in Mexico City at jroeder@bloomberg.net Carlos M. Rodriguez in Mexico City at carlosmr@bloomberg.net
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net
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