IMF reduces growth outlook for Mexico in 2019

The International Monetary Fund (IMF) cut its growth expectations for Mexico this year and next, "evidencing lower private investment" that will be subject to difficult negotiations on the trade agreement with the United States and Canada.

For the first year of the administration of AMLO, the agency estimates that GDP will achieve an increase of 2.1%. Photo: IMF website
For the first year of the administration of AMLO, the agency estimates that GDP will achieve an increase of 2.1%. Photo: IMF website

For this year, the first of the administration of Andrés Manuel López Obrador (AMLO), the agency estimates that the GDP will achieve an increase of 2.1%; rate with which discards that the economy can grow by 2.5%, as was expected in October.

With this adjustment, the IMF aligns its growth expectations with the government's forecast, and with the consensus of 42 market participants consulted by FocusEconomics.

In the update of global expectations, IMF strategists state that "the signing of the free trade agreement between the United States, Mexico and Canada, which will replace the NAFTA, made on November 30; as well as the agreement not to raise rates between China and the United States for 90 days, are welcome signals to dismantle trade frictions. But the final results are still subject to difficult negotiation in the case of the United States."

The uncertain environment for investment in Mexico, will remain even next year, as a result, the IMF also cut the forecast for GDP next year, to leave it at 2.2 percent.

That is, it reduced its expectation of expansion for Mexico by five tenths of a point, which was 2.7% in October.

In a regional spectrum, the deterioration of expectations for Mexico will be more than compensated by a better performance of the largest economy in Latin America, Brazil.

According to the technicians of the Fund, led by Gita Gopinath, Economic Counselor of the agency, the economy led by Jair Bolsonaro, will achieve an expansion of 2.5% in its first year of government, 2019. And warn that "will begin a gradual recovery after the two-year recession, which registered the economy between 2015 and 2016.

This forecast is slightly higher than the 2.4% estimated by the Fund still in October.

Notwithstanding the improvement in the forecast, they anticipate that in the year 2020 there will be a slowdown for Brazil that will lead to a GDP of 2.2%, which is one tenth lower than the estimate published in October.