LatinNews Daily - 04 October 2023

In brief: IMF raises Mexico’s 2023 growth forecast

* The International Monetary Fund (IMF) has released the preliminary findings of a recent official staff visit to Mexico concluding that the economy is undergoing a “broad-based expansion”. Following its visit, the IMF forecast that Mexico’s economy will grow by 3.2% in 2023, up from a 2.6% forecast in July, driven by “robust private consumption and investment”, and “notable strength in service sectors, construction, and auto production”. As a result of this, the IMF noted that Mexico is experiencing record-low unemployment rates and record-high manufacturing capacity utilisation. Economic growth is expected to slow to 2.1% in 2024, up from a previous (July) forecast of 1.5%, due to “binding capacity constraints, a continuation of tight monetary policy, and slower growth in the US”. The IMF expects authorities to meet fiscal targets in 2023, with a projected overall deficit of 3.9% of GDP. Despite the increase in fiscal deficit, gross public sector debt is expected to decline to 52.7% of GDP by the end of 2023 and is considered sustainable over the medium term. However, the IMF warns that the planned fiscal path for 2024 is “unduly procyclical”, with increased deficits and spending that may lead to higher interest rates, a stronger currency, higher debt-to-GDP ratio, and a slower inflation decline.

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