Mexico's Economic Growth Forecast by the IMF

MEXICO CITY (Reuters) – The International Monetary Fund (IMF) announced on Tuesday that it forecasts Mexico’s economic growth to slow to approximately 1.5% this year, attributing this to capacity constraints and tight monetary policy.

For the following year, the IMF predicts growth to decrease further to 1.3% in Latin America’s second-largest economy, coinciding with an expected inflation rate nearing the central bank’s target of 3%.

Mexico’s central bank, known as Banxico, reduced its benchmark interest rate to 10.50% following a split decision in September. Meeting minutes indicated that board members anticipate that easing inflation may lead to additional rate cuts.

The IMF cautioned that “inflation risks remain on the upside,” and highlighted potential adverse impacts from weaker-than-expected economic growth in the United States, increased global risk aversion, and unforeseen outcomes from recent reforms on Mexico's economic output.

In response to questions regarding the IMF projections, Mexico's new President Claudia Sheinbaum stated that the country’s economy is strong, with expectations for agricultural production to grow next year.

She also expressed confidence that none of the proposed constitutional reforms would adversely affect investment in Mexico, despite IMF's concerns.

The IMF noted that recent judicial reforms introduced “important uncertainties about the effectiveness of contract enforcement and the predictability of the rule of law.”

These reforms were passed by the ruling party and its allies last month, who argue that they will help reduce corruption within the judiciary through the popular election of judges and magistrates.

However, these changes have raised concerns from major trade partners, such as the U.S. and Canada, and have sparked protests among judges and magistrates.