Bank of Mexico Lowers Growth Forecast Amid Stubborn Inflation

The Bank of Mexico revised its economic growth forecast for 2024 down to 1.5% from 2.4%, attributing the cut to weaker foreign manufacturing demand and persistent inflation. Despite a slowdown in GDP growth and rising inflation, the central bank anticipates recovery supported by public spending and private investment.

The Bank of Mexico has slashed its economic growth forecast for this year and next, citing weaker foreign manufacturing demand and persistent inflation. According to the central bank's quarterly report released on Wednesday, Latin America's second-largest economy is now expected to grow by 1.5% in 2024, down from a previous forecast of 2.4%, and by 1.2% next year, compared to an earlier prediction of 1.5%.

Banxico, as the central bank is known, attributed the reduced forecast to second-quarter growth that was "significantly" below expectations. External demand is expected to remain soft, particularly due to anticipated weakness in the U.S. manufacturing and construction sectors. Bank Governor Victoria Rodriguez noted that economic growth should eventually be supported by public spending and private investment in the long term.

Recent statistics showed Mexico's GDP expanded by just 0.2% in the second quarter compared to the previous three months, continuing a slowdown trend that started late last year. While the central bank raised its inflation forecasts, it maintained its prediction that inflation will converge towards its 3% target by the fourth quarter of next year. Despite this, Banxico signaled the possibility of further interest rate cuts, following a recent 25 basis point reduction to 10.75%.

(With inputs from agencies.)