Mexico’s central bank expects a stronger economic rebound and greater inflation this year, upgrading its GDP and inflation predictions for 2021 on Wednesday.
The Bank of Mexico, known locally as Banxico, forecasted 6.0 percent growth in Mexican GDP in 2021, up from 4.8 percent earlier, and said it projected annual headline inflation of 4.8 percent in the fourth quarter, up from 3.6 percent earlier.
“Challenges to economic recovery and an environment of high uncertainty still prevail, as the COVID-19 pandemic has not yet faded,” the bank said in a quarterly report.
It went on to say that increased adjustments to global economic estimates, notably in the United States, progress in immunization efforts, notably in Mexico, and less movement constraints all point to a more positive prognosis in the coming quarters.
Growth risks have tended to balance, according to Banxico, while probable bottlenecks in global supply chains, as well as higher input and production prices induced by the epidemic, represent a downside risk for Mexico’s economy.
Mexico’s economy expanded faster than expected in the first quarter, as the nation rebounds from its worst economic recession since the 1930s.
As a result of interruptions caused by the coronavirus epidemic, GDP of Latin America’s second-largest economy fell by 8.5 percent in 2020.
In terms of inflation, Banxico stated that the risk-adjusted balance of risks is tilted to the upside.
Inflation was 5.80 percent year on year in the first half of May, significantly over Banxico’s objective of 3 percent plus or minus one percentage point, fueling speculation that the bank has completed its easing cycle and is on the verge of raising interest rates.