The 2024 elections in both the United States and Mexico could influence Mexico’s economic performance.

Mexico’s economic growth in 2024 is projected to fall between 2.3% and 3.7%, according to the Bank of Mexico (Banxico). This forecast comes after a 3.3% expansion in 2023. However, uncertainties surround this projection, particularly due to upcoming elections in both Mexico and the United States.

Banxico Director of Economic Research, Alejandrina Salcedo, highlighted the potential impact of elections on economic activity. She expects growth to be concentrated in the first half of the year, reflecting election-related dynamics. Risks are seen as balanced, with the possibility of either faster or slower growth depending on factors like the US economy and potential business relocations to Mexico.

The private sector holds a more cautious view. Citigroup’s Chief Economist, Ernesto Revilla, projects a 2.2% growth rate. He expresses concern about the central bank’s restrictive monetary policy and the potential for slowed growth if interest rates aren’t adjusted soon. Delaying rate cuts could limit options for managing future volatility caused by elections, foreign exchange rates, or geopolitical issues.

Inflation remains a concern, although progress has been made. Salcedo acknowledges efforts by Banxico have brought inflation down from over 8% in 2022 to a projected 3.5% by year-end. However, the private sector forecasts slightly higher inflation, potentially reaching 4.3% overall and 4.5% underlying inflation.

Mexico’s economic policymakers face a delicate balancing act. They need to manage growth, control inflation, and navigate the uncertainties surrounding elections in both Mexico and the US. Developments in these areas will undoubtedly influence Mexico’s economic trajectory in the coming year.

Written by Mexpat Realtors –  May  2024

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