MEXICO CITY (Reuters) -The International Monetary Fund (IMF) on Friday forecast Mexico’s economy will grow 2.1% in 2022 and 1.2% in 2023, saying “economic growth is expected to slow in the near term reflecting weaker U.S. growth and tighter global financial conditions.”
The IMF said in a statement that Mexico is well-placed to navigate a turbulent global environment due to “very strong” macroeconomic policies and policy frameworks.
The fund also said it welcomed the “proactive approach” from Mexico’s central bank, known as Banxico, in tackling inflation with interest rate hikes. In September, Banxico raised rates by 75 basis points to a record 9.25%.
Further rate hikes may be needed “for some time” due to uncertainty around inflation in 2023, the IMF said. Banxico board member Gerardo Esquivel told Reuters last month the bank was nearing the end of its rate hike cycle.
The IMF also called Mexico’s envisaged neutral fiscal stance in 2022 and 2023 “appropriate,” while noting retail fuel subsidies had a “sizable” impact on the country’s budget.
IMF directors “generally encouraged the authorities to shift toward more targeted support should oil prices rise again,” the fund said.
They also noted that fostering more private participation in the energy sector would help boost competitiveness and investment, the IMF said.
Mexico has been in extended talks with the United States over a U.S. complaint that plans to strengthen state control of energy is coming at the expense of private firms.
President Andres Manuel Lopez Obrador is looking to expand output from Mexico’s fossil fuel-dependent state energy companies, including the heavily indebted Petroleos Mexicanos.
(Reporting by Mexico City Newsroom; Editing by Anthony Esposito)