Economics: Mixed 2024 economic outlook as trade/FDI opening is combined with heightened risk on the public finance front
Mexico's economic outlook includes some striking contrasts and uncertainties for year-end 2023, and especially for 2024. On one hand, we expect a certain degree of economic growth although at a slowing pace, and for macro-financial variables (interest rates, exchange rate) to remain stable, with inflation gradually easing. However, inflation will likely remain above Banco de México's target, especially in the case of the core component. On the other hand, public finances this year continue to deteriorate, a dynamic that will be more pronounced in 2024 given the extent to which the deficit and public sector debt are expected to increase, as well as the operational and financial management woes at Pemex, not only next year but also in 2025.
Other aspects to be highlighted for 2024 and beyond are opportunities for attracting foreign and domestic direct investment (e.g., nearshoring). Moreover, in recent years trade has undergone a profound structural change , which has implied that operations (exports plus non petroleum imports) have surpassed one trillion dollars per year and once again made Mexico the leading trade partner of the United States.
In this week’s Outlook section, we analyze the economic prospects for the current year and 2024. Regarding last week´s economic news, Banxico maintained its hawkish tone even as it left its interbank reference rate at 11.25% for a fourth time since it first paused in May, as headline and core inflation continued to descend.
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