A man carries a cart of merchandise on a street in Mexico City, Mexico's capital, on July 25, 2022. (Xinhua /Francisco Canedo)
"Mexico's economic slowdown is expected given that the United States is slowing down, and there is an almost 50-percent probability of a mild recession," said an economist.
MEXICO CITY, Dec. 29 (Xinhua) -- Mexico's economy will see lower inflation in 2023 but a high risk of recession due to an expected slowdown in the United States, its northern neighbor and main trade partner, according to experts.
Gabriela Siller, director of economic-financial analysis at Banco Base, told Xinhua that Mexico's gross domestic product could grow 1.7 percent in 2023, down from the forecast of 3.1 percent for 2022.
"Mexico's economic slowdown is expected given that the United States is slowing down, and there is an almost 50-percent probability of a mild recession," Siller said.
According to her projections, inflation in Mexico will decline to 5 percent in 2023, with the key interest rate hovering between 11.25 and 11.50 percent by the end of the year.
"In 2023, foreign direct investment, remittances and exports are going to slow down, possibly leading the currency to depreciate to the level of 20.3 pesos to the (U.S.) dollar," the economist said.
People walk on a street in Mexico City, Mexico's capital, on July 25, 2022. (Xinhua/Francisco Canedo)
The most formidable challenge for Mexico will be its fraught trade ties with the United States due to U.S. complaints against the Mexican government's new energy policies, said Siller.
"If the process goes to a (dispute settlement) panel and it rules against Mexico, it could face fines or tariffs," in addition to "the possibility of recession in the United States, given the aggressive increase in interest rates," warned Siller.
The Citibanamex financial group also noted the latest data suggests the U.S. economy will enter a recession by the end of 2023.
"The economic outlook for Mexico has been complicated by various global factors, such as a forecast of more restrictive conditions in financial markets, high inflation rates and a significant economic slowdown in 2023," said the report.
"Faced with this deteriorated global environment, there is an increased need to promote a domestic environment that boosts short and medium-term growth," it added.
The United Nations Economic Commission for Latin America and the Caribbean estimated the Mexican economy will grow just by 1.1 percent in 2023 and suggested the country work on structural issues to promote higher-than-normal growth.
A man carries boxes on a street in the historic center of Mexico City, Mexico's capital, on April 18, 2022. (Xinhua/Francisco Canedo)
"The process of rising inflation that began in mid-2020 at the regional level seems to be subsiding, and in recent months there are signs of a slowdown in the dynamics of regional inflation," the commission said in its "Preliminary Overview of the Economies of Latin America and the Caribbean 2022" released this month.
"The future dynamics of inflation in the region are closely linked to what happens with inflation in the rest of the world, since its determinants are very similar," it added.
The central Bank of Mexico estimates inflation could drop to the target rate of 3 percent by the third quarter of 2024 after rising to an expected 8.1 percent in 2022 and lowering to 4.2 percent in 2023. ■
