IMF Warns of Slowing Growth and Inflation Risks in Mexico

The International Monetary Fund forecasts Mexico's economic growth will slow to around 1.5% this year, following capacity constraints and tight monetary policies. In 2024, growth is expected to decline further to 1.3% as inflation nears the central bank's target. Judicial reforms in Mexico raise contract enforcement concerns.

The International Monetary Fund (IMF) has predicted that Mexico's economic growth will slow to approximately 1.5% this year, attributing this to capacity constraints and a tight monetary policy.

According to the IMF, growth in Latin America's second-largest economy is expected to decline further to 1.3% next year while inflation is anticipated to approach the central bank's 3% target. Mexico's central bank, Banxico, reduced its benchmark interest rate to 10.50% in a divided decision in September, with board members believing that easing inflation may allow for more rate cuts.

Nonetheless, the IMF highlighted risks to inflation remain high, citing factors such as potential weaker-than-anticipated economic growth in the U.S., increased global risk aversion, and unexpected impacts from recent reforms as threats to Mexico's economic performance. Moreover, a recent judicial reform has introduced significant uncertainties regarding the effectiveness of contract enforcement and the stability of the rule of law, raising concerns among major trade partners, including the U.S. and Canada.

(With inputs from agencies.)