Economics: The risks that are apparent as 2022 ends will carry over into 2023

MEXICO - Report 19 Dec 2022 by Mauricio Gonzalez and Francisco González

The external environment for the coming year is expected to be complicated. Although inflation in the US and in the other major developed economies could ease somewhat, it will remain high and ensure that for a prolonged period we will see a continuation of the restrictive monetary policy and the high interest rates they entail. Such tight monetary policy will increasingly act as a drag on economic activity, a development that is already emerging from recent US industrial production and manufacturing production indicators, with growth trending slower. Back in Mexico, the main risks derive from inflation's likely persistence above the central bank's target, as well as the economic slowdown in 2023 in response to a stalling or outright contraction of the US economy. In addition, public finance has deteriorated in recent months, and this will continue into next year, leaving the government with no room for maneuver for containing any further expansion of public debt, which could approach undesirable levels (60% of GDP) in 2024.

This week we examine our outlook for the coming year, including the main challenges that the Mexican economy will face, and we update the main variables in our macroeconomic framework for 2023-2024.

Now read on...

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